DECEMBER 30, 2002
HSBC and Arrows
Just before Christmas HSBC appointed receivers over the assets of the Arrows Formula 1 team. This move was the result of a debenture (a document which offers security for a loan) which Arrows agreed with HSBC when the bank agreed to loan the team money in March 2002.
In British law a debenture holder may appoint a receivers if it feels that repayment of the loan or its security is threatened and if the borrower has breached the loan agreements. The receiver is nominated by the bank and acts as a "administrative receiver", taking over the running of the company from the directors in an effort to realise its assets usually by selling the business as a going concern. The receiver acts as the agent of the company for a maximum period of three months and then a decision must be made as to whether it should be liquidated. The administrative receiver has no authority to deal with the claims of other creditors and if sufficient funds become available for distribution to the other creditors they must be dealt with by a separately appointed
liquidator.
In effect this means that the team's administration petition, which was to have been heard as soon as the trial between Arrows and Morgan Grenfell comes to an end, is no longer necessary but the winding-up order from Heinz-Harald Frentzen and other creditors will go ahead as planned on January 13.