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The truth behind the sale of Silverstone

NEWS STORY
30/08/2011

Contrary to many media reports doing the rounds at the weekend, Silverstone has not yet been sold. True, its owner, the British Racing Drivers' Club (BRDC) has been courting investors about buying a long lease on the circuit but, as Pitpass' business editor Christian Sylt reveals in the Independent, this process is still ongoing.

Before looking at the stage that the talks are currently at, it is worth casting our minds back to why the BRDC wants an investor in the first place. The origin of this story is the last-minute 17-year contract signed by Silverstone with F1's boss Bernie Ecclestone in December 2009. It prevented the British Grand Prix from being cancelled after Leicestershire's Donington circuit failed to honour its contract to host the race.

Silverstone committed to redevelopment to bring the circuit up to the standard of rival F1 venues. It has fuelled expansion with a £12.5m line of credit from Lloyds Banking Group and opened a state-of-the-art pit and paddock complex earlier this year. However, this isn't the biggest financial commitment which has come from Silverstone signing its F1 contract.

According to F1's industry monitor Formula Money, this year Silverstone is paying an annual fee of £12.2m to host the British GP. It rises by 5% annually and, as Pitpass reported in June, by 2020 this will come to a whopping £18.9m. Based on historic increases in ticket prices at Silverstone this would mean that by 2020 the cheapest tickets to the British GP will cost £195, a 31% increase on the price this year, whilst the most expensive will sell for £475.

If ticket prices remain the same the BRDC could lose money and even now, right at the start of the contract, this is already happening. Despite a near capacity crowd for last year's race, the BRDC reported a £1.9m pre-tax loss for the year ending December 2010, down from a £1.3m pre-tax profit. It wants to put the brakes on this and one of the reasons that the BRDC wants outside investment is to reduce the club's risk and give it a stable and predictable revenue stream. That's not all.

Pitpass understands that the BRDC's directors informed the club's members in mid-August that the new leaseholder will have to invest in Silverstone and pay off debt incurred in developing the new pit and paddock complex. The Lloyds loan itself needs to be cleared in full by July 2015.

The deal sounds good news but as always there is a catch and in this case it could see Silverstone heading out of British hands.

In February this year the accountancy firm PricewaterhouseCoopers contacted a short list of potential investors including leisure businesses, sovereign wealth funds, high net worth individuals and real estate firms. It is believed that they proposed taking a lease of as much as 150 years on Silverstone.

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