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Caterham shareholders' loss accelerates to 41 million

NEWS STORY
28/10/2014

The true scale of the financial crisis which brought down Caterham has finally been laid bare. Caterham Sports, the company which ran the team and collapsed into administration last week has an estimated shareholders deficit of just over 41m and owes a total of 16.2m according to an article in the Daily Telegraph by Christian Sylt

Caterham Sports provided design, testing and race support services to 1Malaysia Racing Team (1MRT), a Malaysian business which owns the coveted Formula One grid slot. Court documents reveal that Caterham Sports owes money to nearly 400 parties stretching across all areas of the sport from teams and circuits to members of the media such as publishing company Haymarket and Speedmerchants, the business run by F1 commentator James Allen which is due 7,200.

Caterham Sports hasn't even paid an outstanding bill of 20,942 to Formula One Hospitality and Events Services which is run by F1's boss Bernie Ecclestone. Little wonder that he recently Said "it's better they go. I don't want people going around with begging bowls".

The biggest creditors include the 784,090 owing to oil company Total and the 711,134 due to computer manufacturer Dell. However, both are eclipsed by the 7.4m unpaid bill to Renault for the V6 F1 engines it supplies to Caterham. The French car manufacturer is by far the biggest creditor and, remarkably, it has not been paid despite paying Caterham Sports 3,042,405.16 this year for sponsorship of the team. This has been its single biggest source of revenue in 2014 according to Constantin Cojocar who bought Caterham Sports from 1MRT in September.

Cojocar, a former professional footballer and director of Romanian transport and logistics company SC Transbus Codreanu, said in his witness statement during the Caterham Sports administration proceedings that "the Company generates very little revenue (5,000,000 in nine months of trading)." He added that "the draft balance sheet shows an estimated shareholders deficit of just over 41,000,000."

The relatively small sum of money that has been flowing into the company explains why it has not cleared its debts. Earlier this month Pitpass revealed that Caterham Sports had failed to settle 34 unpaid bills totalling 750,000 with the smallest coming to just 424. As we pointed out at the time, it would be a sorry state of affairs if a 424 bill was left unpaid by you or I let alone an F1 team.

The catalyst of Caterham Sports' troubles was an event which took place just over two months before Cojocar acquired the company. At the end of June a deal was struck to sell 1MRT which owned Caterham Sports at the time. The owners of 1MRT were a group of businessmen led by Caterham's former team principal Tony Fernandes. The team joined F1 in 2010 but hasn't scored a single point since then. Its lack of success on track led to Fernandes deciding to exit and he agreed to sell 1MRT to a consortium of Swiss and Middle Eastern investors advised by former F1 team boss Colin Kolles.

However, although the sale of Caterham Sports went through, the sale of 1MRT did not. As Cojocar says in his witness statement, "I understand that the sale and purchase agreement was a conditional agreement and completion has not yet occurred, but that the Purchaser appointed directors to the Company and 1MRT, and the previous directors resigned."

In summary the new owners took control of 1MRT but did not own shares in it. Bills were left unpaid in this vacuum and, crucially, one of them was the fee to Caterham Sports for providing the design, testing and race support services .

In turn Caterham Sports could not pay its bills so creditors took action in the courts. This led to bailiffs seizing equipment from its factory earlier this month so that it could be sold at auction to pay the bills.

Cojocar said in his statement that he had a deal with Romanian investors who were due to provide 2m per week to finance Caterham Sports but they were put off by the legal proceedings and the action by the bailiffs. With insufficient revenue coming into Caterham Sports, Cojocar said he had "no choice but to request that the Company is put into administration."

Last week the administrator Finbarr O'Connell said around 200 staff previously worked at Caterham Sports' factory but have had their contracts transferred to 1MRT in the past few weeks. However, he added that their jobs and the team could be at risk if an arrangement to sell Caterham Sports' assets to 1MRT is not struck soon.

In order to race in F1 1MRT requires the design, testing and race support services which Caterham Sports was providing. If 1MRT doesn't do a deal with the administrator to get these services then it places the future of its staff and the team in jeopardy. This raises the question of why 1MRT decided to sell Caterham Sports in the first place given that it was so crucial to its operation as an F1 team. It seems that this decision was driven by the fact that creditors' claims against Caterham Sports are so high as the Telegraph article reveals.

O'Connell is due to be at this weekend's United States Grand Prix in Texas to try and finalise a deal and, to give him some breathing room, Caterham will not be racing there. If it was, it would burn up further costs which would compound its problems. Time will tell whether it will ever race into the clear.

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READERS COMMENTS

 

1. Posted by verde, 29/10/2014 13:27

"would be interesting to see the accounts for 1MRT, as they must have received the ericsson millions as well as the FOM cash and anything received from lotterer and merhi!"

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2. Posted by petes, 29/10/2014 4:32

"@Hondawho....O'Connell's attendance, does it really matter. Let's face it if either of us were in his position what would we do? No brainer really, milk it while you can...."

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3. Posted by ape, 28/10/2014 17:44

"So now 1MRT buys some tools ,trucks and hospitality stuff from Caterham Sports ,takes over a handfull of engineers , gets a third car from a top team and starts competing as racinging team without design and fabrication and testing problems.
....and all the unpaid suppliers of Caterham sports get only about 15 % paid .
Hmmm , i understand Frank does not like this.

"

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4. Posted by Hondawho?, 28/10/2014 12:52

""O'Connell is due to be at this weekend's United States Grand Prix", so pays for that little trip then?"

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