Ferrari Mailing List: F1 article in Financial Times

[pvb308 (pvb308]

Thought some of you guys might be interested in this article in todays 
Financial Times. 


     Jerry

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\f0\b\fs42 \cf0 F1 braces for difficult season\
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\b0\fs22 \cf0 By Christian Sylt and Caroline Reid\
Published: March 16 2009 19:21 | Last updated: March 16 2009 19:21\
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\fs26 \cf0 There are only 10 days to go before the Formula One motor racing 
season begins, with the Australian Grand Prix in Melbourne. But pre-race nerves 
this year are afflicting the sport as a whole as much as the drivers 
themselves.\
The pressure is coming from two sides. On the one, F1\'92s biggest sponsors 
\'96 notably struggling financial groups such as Royal Bank of Scotland and ING 
\'96 are backing away from long-standing financial support in an attempt to cut 
costs and disassociate themselves from the sport\'92s image of lavish spending.\
On the other, income from ticket sales \'96 reflected in the \'93hosting 
fees\'94 F1 levies from race organisers \'96 is declining as recession-hit 
motor racing fans stay at home.\
Figures released this month show that the Belgian Grand Prix, which took place 
last September, made a loss of \'803.8m ($4.9m) in 2008. It had an attendance 
of 52,000 for the race; 10,000 fewer spectators than in 2007. According to some 
reports, sales for the Australian Grand Prix are 15,000 lower than last year. 
Even the cheapest F1 tickets of the season \'96 $31 apiece for the Malaysian 
Grand Prix, compared with an average across all races of $150 \'96 are selling 
poorly, with sales in Malaysia down 20 per cent year-on-year.\
Some GPs have even been dropped altogether, because the finances have stopped 
adding up. This year, there will be no races in France or in Canada, and 
Germany has said it can only continue if it is bailed out, although there will 
be a new one in the oil-rich state of Abu Dhabi.\
F1\'92s third big revenue stream, television rights, looks more secure, thanks 
to multi-year deals, although if more teams follow the example of Honda and 
pull out of the sport, TV interest could shrink, too.\
It all adds up to a squeeze on profits for F1\'92s ultimate owner, CVC, the 
private equity firm, making it tougher for the company to service its $2.7bn of 
debt.\
CVC owns F1 via the holding company Delta Topco, run by billionaire Bernie 
Ecclestone. The business was acquired in 2006 in a leveraged buy-out backed by 
Lehman Brothers and RBS, which subsequently syndicated the debt to other 
investors.\
Debt repayments at Delta Topco totalled $257m in 2007, compared with estimated 
revenues of $1.3bn.\
It is unclear what impact that had on the bottom line of the business, which is 
Jersey-registered, but Delta 3, the biggest of Delta Topco\'92s subsidiary 
holding companies, made a loss of $409m, after $230m of debt repayments. The 
debt matures in 2014.\
Overall, some pundits estimate that F1\'92s revenues this year could be down by 
20 per cent or more.\
In January, Max Mosley, president of F1\'92s governing body, the 
F\'e9d\'e9ration Intenationale de l\'92Automobile (FIA), told a German 
magazine: \'93I cannot envisage that Formula One management\'92s [undisclosed] 
forecast earnings still hold in the economic crisis.\'94\
Some of the most dramatic declines will be in the money coming from commercial 
backers, particularly in the form of corporate hospitality.\
F1\'92s Paddock Club, a glitzy travelling circus of entertainment that provides 
clients with gourmet banquets, track tours and champagne buffets, costs an 
average $3,000 per person per day.\
In recent years at the Australian GP, BMW has entertained up to 400 clients 
with its own grandstand and bar and restaurant area costing it close to 
\'a3450,000 ($634,000). However, the company is axeing this entirely this year.\
Fosters is also cutting its spending on the race. ING said its budget for the 
season would be cut by at least 40 per cent. And RBS will all but eliminate 
corporate hospitality. Such cutbacks threaten the whole profitability of the 
Paddock Club business model, given the vast overheads of transporting catering 
equipment around the world. One of F1\'92s debt holders says: \'93Although this 
isn\'92t the largest of F1\'92s revenue streams, it is the most at risk.\'94\
The two troubled banks are also axeing a combined $30m of trackside 
advertising.}