SEPTEMBER 16, 2008
Collapse of Lehman Brothers complicates F1 ownership
Lehman Brothers, the fourth biggest financial institution in the United States, has applied for bankruptcy protection with debts of around $750bn and assets worth only $639bn. The company was a victim of the US mortgage crisis which resulted in it losing 73% of its value in the first half of 2008. The slide continued in the summer and there was talk of Lehman being sold, but when talks with Barclays failed the bank was left with no choice but to seek protection from its creditors. This means that the company's 16.8% shareholding in Delta Topco, the ultimate holding company of the Formula One group, will probably be up for sale.
Lehman Brothers first became involved in F1 because of the bankruptcy of Kirch Media in 2002, when it acquired shares instead of waiting for debts to be repaid. Lehman continued to hold shares in the business until March 2006 when CVC Capital Partners bought them out, but as part of that deal Lehman had an option to buy a stake in Delta Topco, the new ownership vehicle of the Formula One business. CVC has the first option to buy the Lehman shares.
Lehman Brothers later decided to become involved as a lender to the Formula One group as well, buying some of the debts that the company had with the Royal Bank of Scotland. The Formula One group's debt to Lehman is believed to be in the region of $1.2bn. The bankruptcy may create an opportunity for the Formula One group to negotiate a discount with the Lehman administrators in exchange for a rapid payment, although that would involve borrowing more money from another lender.