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Donington: Council approval is one thing, but what about the money?

NEWS STORY
07/01/2009

While Donington boss Simon Gillett remains confident of getting approval for his circuit's masterplan from North West Leicestershire District Council, the question remains as to where the money for the redevelopment will come from... especially in these harsh economic times.

At the weekend, Gillet spoke of his firm belief that following tomorrow night's council meeting he will have a "piece of paper" giving him its approval, and thereby giving the go-ahead for F1 to return to Donington, and consequently saving the British Grand Prix.

However, in the short-term he needs at least £40m ($59.5m), while over the next five years, if the entire masterplan is to become reality, he is thought to be looking for £100m ($149m).

If Donington is to host the 2010 British Grand Prix - and if it doesn't, the entire contract is void - a number of upgrades have to be carried out and Gillet has until September this year to guarantee to Bernie Ecclestone that this target will be met. If Gillet is unable to meet this deadline, no matter what he says about bits of paper, the GP will be lost.

Aware of all the various scenarios, most notably Donington's failure to come up with the initial £40m, Ecclestone told the Telegraph: "They have a contract with us that I am sure they understand, and I would imagine they have considered the state of the market and have a fall-back position.

"I am relying on what they told me they will deliver, and we have a September deadline, from memory, to see that all is as it should be," he added. "If it is not then we have four or five venues ready to stage a race."

When it comes to raising money, the circuit's owners, Donington Ventures Leisure Ltd (DVLL), appear to be pinning their hopes on securing loans on future ticket sales, a move previously used with some success at Wembley. Essentially, corporate customers buy blocks of seats for up to ten years in advance, and bank loans are secured against these long-term 'guaranteed' sales.

However, things have changed dramatically since last summer when Donington won the Grand Prix, now even the banks are unable to give guarantees far less companies aiming to take customers on a jolly to the British GP in order to win a contract. Furthermore, with no apparent easing of the financial crisis, far from it, the clock continues ticking.

Andrew Hambel, chief executive of ISG, a joint-venture between sports media giant IMG and stadium finance specialists Bastion, acknowledges the problem.

"Would we rather have been testing the market and putting together this product a year ago? Of course we would," he told the Telegraph. "Now is neither the best time to be persuading people to part with money for a new sporting proposition, nor is it the best time to be asking banks to back an offer of this sort.

"Of course we would have been more confident of being able to do this 12 months ago," he continued, "but the project has a lot going for it. Formula One remains a huge draw, and the Lewis Hamiton effect is very positive. Whether it all stacks up to deliver the kind of financing we need is uncertain, but we would not be devoting the time we are to putting this package together if we were not confident that we can deliver."

Of course, it won't only be Gillet and DVLL, and to a lesser extent Bernie Ecclestone, hoping beyond hope that all will fall into place and that the British GP goes ahead next year as planned. Millions of race fans, particularly in Britain, are watching the situation with bated breath.

While we in no way wish to pour cold water on Donington's plans, the fact is, as any fool can see simply by watching the news, reading the newspapers or taking a look at the changes in the High Street, these are difficult times.

Having a piece of paper in your hand doesn't guarantee success... ask Neville Chamberlain.

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