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F1 seeks to ‘weather difficult time’ as $2.9bn loan and $500m credit facility amended

Carlos Sainz in action for McLaren during the 2020 Formula 1 Winter Tests at Circuit de Barcelona - Catalunya (by Xavier Bonilla/NurPhoto via Getty Images)

US-based mass media group Liberty Media has announced an amendment to the term loan and revolving credit facility of certain subsidiaries of Delta Topco, the subsidiary that holds all of its interests in the Formula 1 motor racing championship.

The amendment has been made to the net leverage financial covenant under the facilities agreement governing the $2.9bn (€2.58bn) first lien term loan and the $500m first lien revolving credit facility at Formula 1.

The amendment provides that, subject to compliance by Formula 1 with certain additional conditions, the net leverage financial covenant shall not apply until January 1, 2022.

The relevant conditions applicable to Formula 1 include the maintenance of minimum liquidity of $200m and certain restrictions on dividends, other payments and the incurrence of additional debt.

Formula 1 chairman and chief executive Chase Carey said: “This new flexibility in our debt covenants, along with a strong balance sheet and ample liquidity, will enable us to weather this difficult time and we are excited to start the season in Austria on July 3-5. We return to the track with added purpose and determination with our new #WeRaceAsOne initiative.”

Formula 1 can still recommence the requirement to comply with the net leverage financial covenant prior to January 1, 2022 and, in that case, the relevant additional conditions would cease to apply. The amendment means the $500m first lien revolving credit facility is undrawn.

The announcement comes after Formula 1 last month posted an 84-per-cent year-on-year drop in net profit in the first quarter, at $39m, down from $246m a year ago. F1 reported an operating loss of $137m, compared to $47m in the same period last year.

In April, Liberty Media announced that it had reattributed its stake in Live Nation Entertainment from the sport to its SiriusXM tracking stock in a move that saw $1.5bn in net asset value go in each direction. The move ensured F1 received a net cash payment of $1.4bn as it sought to deal with the challenges created for the championship by the Covid-19 pandemic.

The latest announcement comes with F1 set to start its delayed 2020 season at Austria’s Red Bull Ring this weekend, the venue’s first of two back-to-back events in the championship’s initial eight-race European swing.

The escalating Covid-19 crisis forced the motor-racing championship to cancel the Australian Grand Prix on the eve of its season-opening event on March 15, triggering a wave of further postponements or outright cancellations. Earlier this month, F1 was hit by the cancellation of three more grands prix in Singapore, Japan, and Azerbaijan.

Elsewhere in Formula 1, British technology company McLaren Group, which includes the eponymous F1 team, has sealed a £150m (€164.2m/$184.3m) financing facility with the National Bank of Bahrain (NBB).

McLaren has been badly affected by Covid-19, with sales of its supercars falling significantly during a factory shutdown and the company announcing 1,200 redundancies last month.

Bahrain sovereign wealth fund Mumtalakat Holding is the majority shareholder in McLaren Group, with a 56 per cent stake. Mumtalakat also has a 44.1-per-cent interest in NBB.