Banks to Buy Stake in Formula 1

[Bodo]

quote:
Banks to Buy Stake in Formula 1 Holding SLEC

By Jürgen Dunsch and Benedikt Fehr

FRANKFURT. Bayerische Landesbank, J.P. Morgan and Lehman Brothers have concrete plans to acquire a stake in Formula 1 holding company SLEC for several years, according to sources within the banks.

The stake would be part of a plan to ensure the automotive manufacturers involved in motor racing would have considerable influence in Formula 1 after the collapse of the Kirch group.

The three banks had granted a $1.6 billion loan to Kirch Beteiligungsgesellschaft in 2001 to acquire 58 percent of SLEC. This loan will fall due at the end of June. However, Kirch will likely be unable to repay the loan, such that the banks could begin exploiting the Formula 1 stake. They can also access the 16.7 percent stake in SLEC which is still held by media group EM.TV, but is also pledged to the three banks as part of an option contract with Kirch.

Bernie Ecclestone, SLEC's founder, still has a shareholding of just over 25 percent in the company. Currently, the three banks are preparing to own a princely stake in SLEC for at least three years, after which the stake is to be listed on the exchange at a good profit for the banks. At the beginning of May, Bayerische Landesbank Chairman Werner Schmidt had put the total value of Formula 1 at euro 4 billion ($3.73 billion) to euro 5 billion.

However several hurdles have still to be scaled before the three parties -- automotive industry, Mr. Ecclestone and banking consortium -- can reach agreement. The largest hurdle is the so-called Concorde Agreement with the car manufacturers, which expires in 2007. A 10-year extension of the agreement is currently in discussion. Carmakers DaimlerChrysler, BMW, Fiat (Ferrari), Ford and Renault had threatened Kirch with their own racing series. This is not in Mr. Ecclestone's interest either.

However, it is still open how the manufacturers can be assured of getting the considerable influence they are demanding in Formula 1. Sources from within the negotiating parties say Mr. Ecclestone is being called on to make a move, as his influence in SLEC is much greater under the contract than the capital investment would make it appear.

The second large block of assets of Kirch Beteiligungsgesellschaft, which unlike Kirch Media and Kirch Pay TV has not yet filed for insolvency, is the 40.3 percent stake in publisher Axel Springer, for which Deutsche Bank seems to be making good progress with its exploitation model. The three aspiring Formula 1 banks have a junior lien on this share parcel.

However, at Springer's financial press conference on Tuesday, Chairman Mathias Döpfner again called for maintaining the veto right on the sale of Springer shares. Kirch is trying to get an injunction to stop Deutsche's exploitation of the Springer shares. A decision will be taken on this on June 6.

In mid-May, a banking consortium led by Commerzbank had unsuccessfully tried to acquire Kirch's stake in Springer. Commerzbank Chairman Klaus-Peter Müller attributed this to Springer's refusal to lift the restriction on the shares' transferability.

May 30

© Frankfurter Allgemeine Zeitung 2002
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[JMorgan]

Not read it all but is it a way to ensure the right ads finish first.