MAY 14, 2003
Montezemolo's remarks - what do they really mean?
The Financial Times in London is reporting that Ferrari boss Luca di Montezemolo has set a deadline of December 31, 2003 by which time Bernie Ecclestone and the banks involved in F1 will have to have reached an agreement with the teams over the future of F1. If they have not done that, Montezemolo says, the manufacturers involved in the sport will commit themselves to the planned GPWC series, a rival to Formula 1.
"We would like a solution with Mr. Ecclestone and the banks," Montezemolo told the newspaper. "If not it will be bad but it won't be a tragedy. While Bernie Ecclestone was the owner, everyone accepted most of the arrangements but things have changed. In no other sport are the teams deprived of a share of two of the three main revenue streams - trackside advertising and ticket sales - while having to share just 47 per cent of the gross income from TV rights."
Montezemolo said that without the automobile manufacturers, the Formula One group cannot run a championship. It is widely accepted in F1 circles that whichever championship wins Ferrari will win the game although everyone also agrees that a split would be a disaster and the best solution is for there to be a deal cut between the teams, the banks and Ecclestone. There have been reports in recent weeks that there is deadlock with the banks and the real purpose of Montezemolo's comments may be to try to get things moving again.
Although they seem to be aimed at Ecclestone, it is more likely that the comments made are actually aimed at the banks which are refusing to reach an agreement with Ecclestone. Our sources say that Lehman Brothers and JP Morgan are both willing to do a deal but that the Bayerische Landesbank stands to lose so much money from its investment that it simply cannot afford to write off the money unless it is done over a number of years. The threat that the value of the investment will disappear completely might shift the thinking in Munich but the issue is really one of the banking rules and the liquidity of the company. And that has political implications as well as the Bayerische Landesbank is the state bank of the Bavarian region.
One possible outcome of the current moves is that there will be a huge new bond issue which will raise enough money to pay off the existing bond and also enable the Formula One group to buy Patrick McNally's Allsport Management, the company which runs all the VIP hospitality, trackside advertising and official supplier programs. This would be expensive but would concentrate all the F1 revenues in one company and there could be then be more generous payments to the teams. It is understood that Ecclestone is keen on this solution but wants the teams to commit themselves to a new contract which would keep them in the sport until at least 2015, which is logical given the commitment that a new bond would entail.
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