£150m loan secured by McLaren - update

National Bank of Bahrain confirms short-term financing arrangement

"McLaren Group confirms to the markets that final documentation has been signed and regulatory approvals have been granted for GBP 150 million of funding." That's all McLaren's investor press release says, blunt, direct and devoid of any further detail than the absolutely vital information: there's some money coming.

Vital money. As reported below, it was public knowledge that things were looking bleak for McLaren; times were tough enough not only for it to consider mortgaging the factory and heritage car collection, but actually go to court with a group of creditors when that attempt was resisted. That case was fast-tracked on the basis of an impending cash flow crisis.

Of course, blame has been placed at the door of the pandemic. "Interrupted our momentum" was the phrase used by CEO Mike Flewitt, which naturally downplayed the situation, but the reality was stark: supercars weren't being built, dealerships weren't open to sell any, and no Formula 1 events meant no revenue there, either. Both the Automotive and Racing divisions had no money coming in, and no clear sign of when any might be.

News of the loan is very much lifeline, then. According to a statement issued to its domestic stock market, The National Bank of Bahrain is the source of the loan. Interestingly Mumtalakat Holding Company, the McLaren Group's majority shareholder (its stake is currently 56%), also has a 44.06% share in the National Bank. The money is likely to be a stop-gap while McLaren explores its other refinancing options. Hopefully it will kickstart some more optimistic news for McLaren Group - especially with F1 restarting this weekend, too...

ORIGINAL STORY, AS REPORTED 15/05/2020:
Not so very long ago McLaren appeared to be on a roll. There was no shortage of product in the pipeline and even its struggling F1 team seemed to have turned a corner. The Group’s revenue reached £1.4 billion in 2019, 18 per cent better than the year before. In early March, it reported raising £300m of equity from its long-standing shareholders. Its problems with residual prices were well known, but otherwise everything appeared to be shipshape.

Now, perhaps inevitably, it seems that the interruption caused by coronavirus has given the boat a proper rocking. The manufacturer has apparently had a request for a £150m government loan turned down. Sky News says that it is considering mortgaging its collection of historic racers - which includes everything from Ayrton Senna’s MP4/4 to Mika Hakkinen’s MP4-13 - and even the factory in Woking to generate short-term funds.

Were it a normal year, McLaren’s racing outfit would have received its share of F1’s income as well as its sponsorship revenues, the season now passed the date of its sixth round. There's no reason to think that the automotive division's healthy growth rate - up 7 per cent in 2019 - wouldn't have continued either. In a normal year.

Sadly 2020 is an unprecedented year, and the knock-on effect is proving seismic. It's hard to believe that a company with McLaren's track record won't find the assistance it's looking for - the official statement is that leaders are “exploring a variety of different funding options to help navigate these short-term business interruptions” - but not for the first time it goes to show just how fragile the cashflow of a modern carmaker can be.

The McLaren Group is now chaired by former Diageo CEO, Paul Walsh. Speaking at his appointment earlier this year, Walsh said his responsibilities will revolve around “working on the next phase of McLaren’s development” following his predecessor's (Shaikh Al Khalifa, now non-executive director) “vital reintegration of the Group”.

Elsewhere McLaren’s racing team received a boost with the signing of seven-time Grand Prix winner Daniel Ricciardo as a driver for 2021. The Aussie will join 20-year-old Brit, Lando Norris, at the squad. A team that many had down as one of 2020’s biggest improvers.