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AUGUST 28, 2005

A new finance scheme for F1

It might seem unlikely that Formula 1 could be saved from itself by a 40-something-year-old American but stories leaking out that Robin Saunders, once the golden girl of city finance, could be making a comeback with a $1.5bn plan to buy control of Formula One from the three banks involved. The stories, published in the Sunday Telegraph, suggest that her private equity fund Clearbrook Capital Partners is aiming for a leveraged buyout of the sport, which would end up with the teams owning the business.

Saunders made her name at Deutsche Bank in the mid 1990s and was hired by West LB in 1998 to run its investment business and quickly made an impression with the funding of Wembley Stadium and backing Philip Green's takeover of British Home Stores. In 1999 she became involved in Formula 1 by agreeing to fund Bernie Ecclestone's Euro-bond issue, which the F1 magnate is now in the process of paying off. Since then, however, she has had setbacks and left West LB after two serious losses on an investment in the television rental company Boxclever. The deal would involve Ecclestone maintaining his shares and control of the business, while paying off the banks.

This all sounds marvellous for the teams but it rests on the premise that they must pay back loans which will be used to buy the business or whether they prefer to start their own business and not have to deal with the debt involved. The problem with this course of action is that it would create question marks about the sport in the financial world which would be best avoided. It will also leave Ecclestone in a position of power as he would remain the power-broker in the short-term at least.

Ecclestone has so far been unsuccessful in signing up teams to extend the current Concorde Agreement, having managed to attract only three of the 10. There is no obvious reason why one finance group is better than another from the team's perspective but obviously Saunders would be a much friendlier face for Ecclestone, who is constantly in difficulties with the three banks -Bayerische Landesbank, JP Morgan Chase and Lehman Brothers - who currently control the business. They were all in court on Friday fighting over control of Formula One Administration.