What now for Arrows?

Without an entry in the Formula 1 World Championship, the Arrows team is in trouble. The granting of an entry brings with it (if all the necessary conditions have been met) a ticket to the rights, privileges and responsibilities of the Concorde Agreement. This amounts to something in the region of $15m a year from TV revenues. Without that money and the guarantees that go with it, the value of what is left of the Arrows organisation has reduced dramatically. It also means that Tom Walkinshaw is no longer permitted to sit on the Formula 1 Commission.

So is there is a future for Arrows elsewhere? It was stated in one of the many law suits a few months ago that the total assets of the Arrows company were $38.4m at net book value. Some of this would be recoverable but a lot of the equipment would realise only a fraction of that. If the team goes into liquidation there would not be much for the unsecured creditors as the HSBC has a debenture covering all Arrows assets other than the Bedford windtunnel, which is mortgaged to the Bank of Wales for $5.7m.

There is still the question of the Morgan Grenfell law suit which will establish whether or not there is any legal validity in Tom Walkinshaw's personal guarantee to Morgan Grenfell for nearly $10m and whether or not the bank has any guarantees on money it invested in Arrows. In late September (the last available figures) Morgan Grenfell's exposure to Arrows was $22m plus $57m. Walkinshaw's companies TWR and Broadstone are owed $50m by the team and other creditors, mortgages and liabilities amount to $34m.

The rescue bid from a German company must now be in doubt, despite the fact that Oliver Behring told pressmen a few weeks ago that there was an agreement between Tom Walkinshaw and the FIA that the team would get an entry for 2003 and that there was "a 99.95% chance" that the team would be present at the first race of 2003. The news that Arrows has not been given an entry will thus be quite a shock to Behring and his Middle Eastern backers.

The future of Arrows will now go back to High Court on December 9 when the Morgan Grenfell-Arrows-Walkinshaw trial is finally to be settled in front of Justice Sir Gavin Lightman. Because of this case the Arrows petition for an administration order has had to be delayed and a separate winding-up petition is then dependent on the outcome of the administration hearing. The team could be placed in administration but might also be put into liquidation, in which case the court will appoint an official liquidator to try to realise whatever assets he can. He will then file a report with the Department of Trade and Industry.

It is theoretically possible that if the German money does turn up and the Morgan Grenfell case is settled, Arrows could remain as a going concern. The team might try to enter a different championship, perhaps one of the two American series, but its days in Formula 1 would appear to be over - at least for the time being.

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