SEPTEMBER 18, 2006
Pay back time for Formula One
The latest reports of the Formula One group of companies has revealed that there is a law suit against one of the companies (SLEC) and against the Ecclestone Family holding company Bambino, relating to a loan of $235m made five years ago by the Swiss banking firm of Kamos-Finanz. The claim is for $300m, which translates as being the loan plus interest.
The problem dates back to 2001 when F1 boss Bernie Ecclestone was completing a deal to acquire the commercial rights to F1 for 100 years. That deal was struck with the FIA in 2000 for $313m to be paid by Formula One, plus small annual payments to cover costs. A downpayment of $60m was made in the summer of 2000 with the balance due a year later.
The disputed loan was granted to the Formula One group in April 2001, just before the money had to go to the FIA. That money ended up in the FIA Foundation.
The terms of the loan between Formula One and Kamos-Finanz are not known but were probably affected by the terms of the $1.4bn Eurobond that Formula One issued in May 1999, underwritten by the German bank West LB. This meant that Formula One could not pay dividends until the bond had been paid. The result of this was profits have been collecting for some years and the existence of this large sum of money played an important role in the negotiations earlier this year with the F1 teams.
The bond is believed to have been paid off at the end of May this year, more than four years ahead of the planned expiration date of November 2010. It may be that Kamos-Finanz had agreed to wait for that to happen. However, on July 3, the bank issued writs against Formula One group company SLEC and against the Ecclestone Family's Bambino Trust.
They have until October 2 to respond to the claim.
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