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Revealed: The areas of F1 most feeling the credit crunch pinch

Despite the relatively rosy picture being painted by Formula 1 commercial rights-holder Bernie Ecclestone, it would seem that the world's most glamorous and expensive sport is weathering the current global recession and unemployment scourge with rather greater difficulty than is obvious to the public eye.

Not only has Japanese car giant Honda ditched its underperforming F1 team, but the international banking crisis has seen key sponsors Credit Suisse, ING and the Royal Bank of Scotland all either withdraw or announce their withdrawal from the top flight in recent months, leaving BMW-Sauber, Renault and Williams respectively seeking new backers – in a climate in which potential investors are increasingly backing away.

ING is to slash its 2009 racing budget by at least 40 per cent, with RBS – widely pilloried for its overly-extravagant expenditure on sporting promotion in recent years – abandoning its practice of lavish corporate hospitality, in addition to a combined $30 million of trackside advertising, reports the Financial Times. Beer company Fosters is also reducing its spending on the season-opening Australian Grand Prix.

In terms of grands prix themselves, races in Canada and France have bitten the dust in 2009 due largely to economic constraints, with Germany also feeling the pinch and unsure of its own long-term place on the sport's annual calendar unless financial aid is forthcoming. Ticket sales are reputedly down 15,000 for the curtain-raising outing in Melbourne, with a 20 per cent drop in Malaysia. The 2008 Belgian Grand Prix at Spa-Francorchamps made a loss of €3.8 million in 2008 in relation to 2007, when 10,000 more spectators were in attendance.

“Gate revenues and, particularly, merchandising and sponsorship will drop off,” Richard Feigen, managing director of brokerage firm Seymour Pierce, told British newspaper The Observer. “The corporates will stop buying boxes, and some fans may only go to the bigger [events].”

Private equity organisation CVC owns F1 via the holding company Delta Topco, which is run by the sport's ringmaster Ecclestone. The FT reveals that Delta Topco's debt repayments in 2007 amounted to $257 million, with estimated revenues of $1.3 billion.

The largest of Delta Topco's subsidiary holding companies, Delta 3, made a loss of $409 million, after $230 million of repayments on a debt that is set to mature in five years' time. CVC's total debt is believed to be some $2.7 billion, with experts suggesting F1's overall revenue this year will fall by 20 per cent – if not more.

CVC's lenders are said to be growing increasingly concerned about the ability of the company to meet its interest payments, with senior debt issued to the takeover of the sport's commercial rights presently trading at just 51p in the pound.

“Sport will undoubtedly be affected by the downturn in the economy as discretionary spending becomes more problematical,” revealed Philip Long, a partner at PKF accountants and business advisors.

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Andy - Unregistered

March 17, 2009 4:32 PM

I think everyone misunderstands what Bernie means when he say's F1 in good shape. He means I'M ALL RIGHT JACK, i'm a limited company(s)so my remaining billions ( after paying off the misses etc ) are safe and while most of the world is is taking CUTS in revenue, income or working hours, B.E. is still increasing his charges and demands to venues etc. The FIA is just as bad increasing drivers licences. BERNIES ALL RIGHT JACK so F... everyone else. What an A...H...

Sisk Reeves - Unregistered

March 17, 2009 12:28 PM

What BE completely fails to understand is the core following of F1. Taking it further and further away from the European roots may make him (even more) money but it belittles the history. Grand Prix racing will one day split, and "F1" will find itself as a backwater, running races in the middle and far east. Ecclestone should retire with his zillions and let a younger more pro-active person take over and get GP racing back into it's historical markets. Pity we fans cannot vote him out. So much for democracy in sport!

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