Will Ferrari still get $100m bonus?


Last week Chase Carey targeted a 15 - 18 race calendar, only for an overly optimistic Ross Brawn to go one better yesterday and target 19 races once the coronavirus is given the all-clear.

Naturally, both claim that the eagerness to get the season going is for the fans... "We have to remember there are millions of people who follow the sport sat at home," Brawn told Sky Sports. "A lot of them are isolating and to be able to keep the sport alive and put on a sport and entertain people would be a huge bonus in this crisis we have."

Fact is however, that the sport needs to get going in order to stay afloat.

Last week, according to Forbes, business and financial services Moody's reported that F1 has "substantial liquidity headroom of around $900 million, comprising $400 million cash balance and $500 million undrawn committed revolving credit facility. Moody's expects this to be sufficient to absorb cash outflows from...team payments, other overheads and interest costs in the event that the 2020 season is cancelled."

Fact is that F1 is currently paying the teams their 2019 prize money at the rate of $100m a month. Having begun payments in February, even Diane Abbott will appreciate that by October F1 will be perilously close to running out of cash, for with virtually no money coming in at present, that "$400 million cash balance and $500 million undrawn committed revolving credit" will have been almost used up.

So, F1's desire to get back to (real) racing as soon as humanly possible is more about balancing the books that pleasing the fans... after all, as someone once said, "cash is king"!

While the teams continue to bicker over the budget cap, seemingly bogged down in minutia such as the cost of gearbox development, it has been interesting to see Ferrari boss, Mattia Binotto talk of flexibility. Indeed, in many ways - but not all - the Italian team appears to be bending over backwards to accommodate Chase and the gang.

Then again, it has good reason to.

While we know that the prize money represents around 68% of F1's profit, and last year came to around $1bn its distribution is not entirely based on results.

47% of F1's profits is split into two equal amounts, with half going to the top ten teams based on their Constructors' Championship standing from the previous year, while the other half is divided equally between the teams that finished in the top ten in two of the previous three seasons.

Then there's the Constructors' Championship Bonus (CCB).

According to F1 company filings, the CCB comes to "the greater of 7.5% of our Prize Fund EBITDA, and US$100 million."

In other words, if 7.5% of F1's profit is less than $100m - as is likely to be the case this year - the CCB fund would come to that amount.

Regardless of the previous year's results, the CCB sees "the team ranked first receiving 37% of the CCB fund (with a minimum payment of US$37 million), the second team receiving 33% of the CCB fund (minimum US$33 million) and the third team receiving 30% of the CCB fund (minimum US$30 million)."

However, courtesy of one of those quirks for which F1 is rightly legendary, this doesn't mean a nice fat bonus for Mercedes, which has dominated the sport since the introduction of the hybrid formula, winning every single title and 73.6% of the races...

No, it is divided between the top three teams based on the number of races they won in the four seasons prior to 2012, the year in which the CCB was introduced, which means that Red Bull, Ferrari and McLaren are the beneficiaries.

In other words, each season Red Bull receives a minimum $37m courtesy of the CCB, while McLaren picks up a minimum of $33m and Ferrari $30m.

However, in addition to the CCB fund and its share of the 47% prize fund, the Maranello outfit also receives "the greater of an amount which is capped at 5% of our Prize Fund EBITDA and US$62.2 million".

Based on the Italian team's long history in the sport, it is paid out whether it won the title, finished fourth or 'did a Williams'.

Like the CCB fund, if 5% of F1's profit is less than $62.2m - as is likely to be the case this season - it would come to that amount.

So while it is great to hear Chase and Ross talk of their desire to get the racing back on track 'for the fans', and to see Ferrari being uncharacteristically flexible, fact is it's really all about the money.

That said, while Ferrari is 'entitled' to the money, whether it gets it this year is another matter entirely… for unless the cars are back on track sometime soon the F1 coffers are going to resemble Old Mother Hubbard's legendary cupboard.

Article from Pitpass (http://www.pitpass.com):

Published: 09/04/2020
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