Caterham F1 team 2014

[seinfeld]

Lets clear up some misconceptions about going into 'administration', its similar to 'Chapter 11' proceedings in the USA.

The administrator is appointed when a company is in danger of bankruptcy. They are not self appointed, they are appointed by the company itself (as a defence) or its suppliers asking a court to impose an administrator (to force the company to resolve the problem). In this case a supplier (Export-Import Bank of Malaysia Berhad) has forced the company into administration because of an outstanding debt.

The administrator takes over the running of the company in place of the owners. The administrator's job is to keep the company running and find a buyer, or if that doesn't work they sell the assets to raise cash to settle as much of the debt as possible.

In this case the administrator has said they intend to keep the company running until they find someone to buy Caterham. The comment about being the TP is because the administrator is running the company, just like a TP or CEO. This does not mean they are buying the company, simply that they are in the hot seat until new funding is found.

Thanks for that.
But I think I have to say the administrator isnt doing a very good job of this. they closed down the factory and refused entry to the workeers. how is this being conductive. especially if making it to Austin was a priority?

[Pierce89]

The article also mentions the possibility of the administration firm taking a shareholding.

I can't see anything about that in the article.

It says:

"In a statement issued on Friday afternoon, it said that the move - which has included a deal to take over shareholding of the team - should boost Caterham's chances of finding a buyer that can keep it going."

[multisync]

Lets clear up some misconceptions about going into 'administration', its similar to 'Chapter 11' proceedings in the USA.

The administrator is appointed when a company is in danger of bankruptcy. They are not self appointed, they are appointed by the company itself (as a defence) or its suppliers asking a court to impose an administrator (to force the company to resolve the problem). In this case a supplier (Export-Import Bank of Malaysia Berhad) has forced the company into administration because of an outstanding debt.

The administrator takes over the running of the company in place of the owners. The administrator's job is to keep the company running and find a buyer, or if that doesn't work they sell the assets to raise cash to settle as much of the debt as possible.

In this case the administrator has said they intend to keep the company running until they find someone to buy Caterham. The comment about being the TP is because the administrator is running the company, just like a TP or CEO. This does not mean they are buying the company, simply that they are in the hot seat until new funding is found.

Thanks for that.
But I think I have to say the administrator isnt doing a very good job of this. they closed down the factory and refused entry to the workeers. how is this being conductive. especially if making it to Austin was a priority?

Because unlike the previous owner they have to operate with due diligence and within the law. They cannot 'speculate to accumulate' unless there is a g.teed ROI.

I had a hotel chain go bust on me and an administrator came in and run them for a year until they sold them all on individually . I did not get a penny of the outstanding (about 8k) .
However as we were half way through a new installation when they went bang the administrator wanted to complete the work but only -from their end- when funds were available.

It's actually safer working for a company under administration than not...

[Facts Only]

Lets clear up some misconceptions about going into 'administration', its similar to 'Chapter 11' proceedings in the USA.

The administrator is appointed when a company is in danger of bankruptcy. They are not self appointed, they are appointed by the company itself (as a defence) or its suppliers asking a court to impose an administrator (to force the company to resolve the problem). In this case a supplier (Export-Import Bank of Malaysia Berhad) has forced the company into administration because of an outstanding debt.

The administrator takes over the running of the company in place of the owners. The administrator's job is to keep the company running and find a buyer, or if that doesn't work they sell the assets to raise cash to settle as much of the debt as possible.

In this case the administrator has said they intend to keep the company running until they find someone to buy Caterham. The comment about being the TP is because the administrator is running the company, just like a TP or CEO. This does not mean they are buying the company, simply that they are in the hot seat until new funding is found.

Thanks for that.
But I think I have to say the administrator isnt doing a very good job of this. they closed down the factory and refused entry to the workeers. how is this being conductive. especially if making it to Austin was a priority?

Most of the value of an F1 team will be in its IP and physical assets (rather than customer turnover, which a shop/hotel/restaurant would have) so taking the time to inventory and protect these assets is more diligent than just getting people in to carry on working.
I doubt anyone at Caterham would deliberately hurt the company but it only takes one P'Od employee with a memory stick or a chancer with an old team shirt and kit bag from eBay to severely damage the value of the IP or assets.

[Richard]

It says:

"In a statement issued on Friday afternoon, it said that the move - which has included a deal to take over shareholding of the team - should boost Caterham's chances of finding a buyer that can keep it going."

That means the administrator has control of the shareholding so they are free to sell that to someone else. It's an important distinction that the administrator does not have ownership even though they act as if they are the owner (within legal constraints).

As for closing the factory and skipping races, the administrator's job is to cut costs so the company can survive or pay off the debts. The deal with Bernie means Caterham lose nothing by staying at home. In contrast if they went to the races then they'd spend money that would be better used to pay debts and staff salaries.

[ScottB]

The administrator is doing their job, which is to come in, eliminate all the costs it can to get the business on to a level footing and find a buyer, if it can't, it'll sell off everything it can. In both those options it's duty is to raise the most it can for the creditors.

Probably the most relevant comparison is with football club administrations, there you will see players immediately released, back room staff made redundant etc. It might seem a counter productive move to shut the factory, but if there's no money in the pot to pay the staff, they simply can't open it. Administrators are not allowed to create any new debt, they must run the business hand to mouth, with whatever cash it has to hand. So not going to races and not opening the factory make a lot of sense, because it eliminates huge costs to keep the business alive long enough to explore finding a buyer.

Their biggest barrier to achieving that is, I suspect, cashflow. The team has little in the way of sponsors, and I doubt there will be any cash coming from the drivers if they aren't racing, so I suspect this will only last until the next big bill lands that they can't afford to pay, if no buyer has been found it'll be liquidation.

With that in mind, I wonder, does the entry revert to the FIA, or will it be purchasable in the liquidation fire sale? If it's the latter, it probably makes more sense to come in then and buy up the bits you want, rather than taking over the whole debt ridden mess that exists at the moment...

[turbof1]

The entry goes back to the fia if the team fails to commit to next season. It's quite technical, but do know that it's really impractical to "buy the team" at an auction. It could be possible though; the most important thing now is to have cars which comply with 2015 rules, basicilly a current chassis with current aero would do, with only a change of nose needed. The entry would be the least of the worries, with the fia probably desperate to field enough cars in 2015. The entry would be a formality provided the new team shows enough of a promise to be ready at the start of the season.

I personally think concerning the time frame it's impossible to go down that route. Nothing major will be sold now, and the full on liquidation of the team could take months. As you said, directly taking over the team is even less an option given the debt and also because Fernandes has hidden a part of it in unclear constructions. Infact the whole original team has been fragmented into seperate companies. The team itself has been sold to a group hiding in the shadows, but Tony still has the shares of it. In short this would be completely off-putting any potentional buyers even if there was no debt.

[ScottB]

The entry goes back to the fia if the team fails to commit to next season. It's quite technical, but do know that it's really impractical to "buy the team" at an auction. It could be possible though; the most important thing now is to have cars which comply with 2015 rules, basicilly a current chassis with current aero would do, with only a change of nose needed. The entry would be the least of the worries, with the fia probably desperate to field enough cars in 2015. The entry would be a formality provided the new team shows enough of a promise to be ready at the start of the season.

I personally think concerning the time frame it's impossible to go down that route. Nothing major will be sold now, and the full on liquidation of the team could take months. As you said, directly taking over the team is even less an option given the debt and also because Fernandes has hidden a part of it in unclear constructions. Infact the whole original team has been fragmented into seperate companies. The team itself has been sold to a group hiding in the shadows, but Tony still has the shares of it. In short this would be completely off-putting any potentional buyers even if there was no debt.

Really, at this point you'd be better buying Marussia, as it seems to be in a lot less of a mess, and is, arguably at least, a better platform to build on. Never mind Sauber, STR, FI or Lotus, that are all likely up for sale for the right price.

IF you could push Caterham into liquidation, buy up the designs to the cars, acquire yourself a factory and start trying to snap up staff, as well as get your hands on the entry, that wouldn't be too bad a way to go presumably, but given the mess the current company is in, and the possibility for further dispute and legal action between Fernandes and the new (ex) owners, the likelihood of a quick admin or liquidation seems remote.

Wouldn't be surprised if their entry gets yanked and given to Bernie's mate Kolles on the side. Doesn't he have the cars at his facility in Germany?

[Richard]

The F1 entry is the only meaningful asset owned by this team. Without that the IP and the F1 specific equipment is redundant, it's just a pile of machine tools & autoclaves. The high cost items (the cars) will be worthless.

If the administrator can find someone interested in taking over an F1 entry, then the worthless but high cost bits might be tempting for that person because it would give them an F1 team off the shelf. Of course any potential buyers can choose between Marussia & Caterham, plus Force India are open for offers too. So it's not as if the administrator can say Caterham is a unique opportunity.

[turbof1]

The F1 entry is the only meaningful asset owned by this team. Without that the IP and the F1 specific equipment is redundant, it's just a pile of machine tools & autoclaves. The high cost items (the cars) will be worthless.

If the administrator can find someone interested in taking over an F1 entry, then the worthless but high cost bits might be tempting for that person because it would give them an F1 team off the shelf. Of course any potential buyers can choose between Marussia & Caterham, plus Force India are open for offers too. So it's not as if the administrator can say Caterham is a unique opportunity.

I'd imagine any potentional buyers just skipping over caterham and going straight to marussia given they atleast will be getting quite a bit of price money. Plus ownership is much more straight forward. Force India will be quite a pricy team to buy.

Very sad for Caterham fans, and especially for personel, but the truth is that the team's only option is liquidation.

Any potentional of caterham sponsors going to marussia?

[Richard]

There are two teams available, so the buyer need only offer the liquidation value of assets to buy either team. Remember Marussia only get the prize money if they turn up in 2015, if they fold then the prize money disappears. So the current Marussia owners are currently faced with zero income from the prize money, they can only get liquidation value, so why offer them more than that? The Caterham sellers are in exactly the same scenario, the best they can hope for is liquidation value.

The scenario is that a buyer comes in and offers liquidation value for Marussia with debts cancelled. The sellers howl and say they want recognition for the prize money. The buyer shrugs and switches to Caterham. The Marussia people are left with nothing. Then the Caterham people howl and say they want some of the debt cleared. The buyer shrugs, asks Bernie for a fresh entry, waits until the day of the liquidation sale and buys the assets debt free. If Bernie says he'll not grant a fresh entry then buyer walks away and Bernie is left with one less team.

It's very similar to the Brawn GP scenario - the buyer has nothing to lose, the seller loses everything. The difference this time is that there are two sellers so the "take it or leave it" argument from the buyer has even more strength.

[ScottB]

Some suggestion on Twitter from the likes of Will Buxton that Forza Rossa will be entering next year.

Presumably that'll be Kolles with everything he's managed to acquire from Caterham and a wee helping hand from his buddy Bernie...

[marcush.]

staying at home is a breach of contract towards all sponsors of the team .They might claim payback from the team owner in this case from the administrator.
I´m not sure if it is a wise move for Caterham to not race... as it triggered Marussias move to follow suit-difference is Marussia does not really have big sponsors...

Caterham has the same problem as Marussia in terms of value and assets to be sold to a new owner.With every day less and less of the human recources will disappear as they need to make a living and cannot wait for wonders or buyers.

It was a bit different with Brawn ...HRT disappeared quicker than it materialised Brawn had the Honda money to see the team through 2009 (even if he slashed the workforce brutally very early ) ....not sure how many people were kicked out at Sauber when BMW left or how Toyota handled their move out of formula 1

[ScottB]

Sponsors wanting money back would join the queue, the largest creditors will get the lion share, or if they were secured creditors (I'd be very surprised if this bank wasn't), they'll get the lot.

Suppliers and other small companies likely won't get a penny. Though you'd imagine it might have been awhile since anyone did anything with the team for anything other than cash up front...

[Jonnycraig]

staying at home is a breach of contract towards all sponsors of the team .They might claim payback from the team owner in this case from the administrator.

The advertising will be paid in instalments, like all large business transactions.