Formula One: The Tax Monster - A look behind the scenes

Formula One is a very secretive circle. Hardly anyone knows what is really behind the scenes between FIA, Ecclestone, the rights holder CVC, whose employee actually Ecclestone, the teams and the sponsors is going on.

Numbers, there are few, not even the budgets of the teams really know you. Sometimes, however, what seeps through, but those are just appetizers. The Guardian, appeared on the blog of Matt Scott, a report that the company Formula One is in debt up to their necks. It is called a sum of 5 billion dollars, with which the series is reportedly in debt. The team surprised to have received this number and I once went in search if you can shed some light on the matter. And trying to decipher the corporate network from Bernie Ecclestone. What follows is thus rather an approximation of what is behind Formula One.

At first the question: Who or what is the CVC? The company's full name and CVC Capital Partners was even a spin off of the American Investmen Citigroup. The management of CVC, however, already made in the 90 years regardless of Citi and is now a huge conglomerate with diverse interests. Thus they heard the luggage manufacturer Samsonite as well as parts of the former Ruhr AG, now Evonik. No classical locust, because the investment in the long term, but you made money, that others earn money and to invest in these companies.

CVC is always referred to as the owner of "Formula One Group," which is not true, because there is not in that sense. Ecclestone has distributed the Rights of the Formula One on various sub-companies and the list of his business is endless. The blogger Alianora La Canta has a remarkable post once made ​​a small portion of firms identified that belong to the empire. It does not include all companies that Ecclestone and Flavio Briatore are. I got that far as it went, checked and am also a similar result came. I've left out but the company Briatore and in the case of companies, the rights of (name, intellectually, TV) to hold the F1, I'm not sure how the connections are. Here is a diagram of what the thing at first glance does not get any easier, and probably contains only a part of the truth:

(Note:. Makes Bambino is listed twice, because I wanted to pull the arrows do not cross through the chart What is "Delta 2", except parts of "Alpha Prema" to hold, I do not know.)

Just to make clear that the SLEC, which held the entire rights to the Formula One, was a "Bernie" company that was bought by Alpha Prema, which in turn was a company of CVC, only then was the cascade of further strategies firms built, ranging up to Delta Topco. The important thing is this: The CVC, Delta Topco to 70%. Shared 20%, JP Morgan and Lehman Brothers, which is not clear who has the share of bank acquired Lehman fumed. The Bambino is virtually holding the "family business" by Ecclestone and holds around 9%. The rest is distributed to friends and acquaintances. At Delta Topco is CEO Bernie Ecclestone. Topco is that the umbrella company for all other companies that have something to do with Formula One, the shares. Of these, except "Allsports" to manage the Paddock Club and belong to Beta Holdings. Beta but has a credit of CVC received so they could buy Allsport. Delta Topco also includes some of the rights to GP2, which are also of Gamma Topco (not on the chart) held, in turn, is Bernie and Briatore.

One thing is clear - you do not want anyone getting out so easily, who owns the F1 for now. Ecclestone is nominally only governor of the CVC. But, they do not have your finger on the right-negotiable rights of Formula One. Well Name and TV rights. The Ecclestone has spread across different companies. No company retains all right, but no company can survive without the other. Really complicated, it is in the rights of Formula One. The marketing rights are owned virtually all of the FIA, (apart from the Paddock Club privileges) which it has but in 1999, for 100 years to the "Formula One Administration" passed, which restored it to the given "Formula One Management" (the famous FOM) [has source tip of NoteMe]. Allegedly received only nine teams now 47% of the revenue from this market. All other revenues are more or less about the Delta Topco. The FIA ​​itself collects 30% of the TV pot. In other words - without the FIA ​​and Ecclestone, the CVC deserves nothing. In this context it is interesting that the name Ecclestone and TV rights of the GP series holds. There is a GP2, GP3 one, but not (yet) GP1, but the rights are as well. If we keep because of a back door if you want to get rid of the FIA?

Right in the middle are the teams that have to do with the network only in passing. It is rumored that Williams, McLaren and Ferrari are involved in the SLEC. Otherwise, you stand there as though those that provide the sport, but from all sides (FIA, Ecclestone, CVC)-dependent. What the manufacturers are not happy, but the attempt failed, so has its own series, because the FIA, many sponsors who come directly from Ecclestone and had met with several banks in the head.

The debts of the Formula One comes from two sources. Firstly, since the $ 2.9 billion, the CVC had taken to buy the SLEC, which is the remains of the church / EM.TV disaster. The are comfortable with the "Alpha D2" company, which in turn is a 100% subsidiary of Delta third Interestingly, the money was then part of the Royal Bank of Scotland, which indeed is now largely in state hands. In this sense the fault of Formula One, or CVC, the British government a lot of money.

The new debt, so the rest of the 5 billion euros will come from the CVC, which has apparently parked a couple of old debts with its own Delta Alpha 3 or D 2. Where did that come is unclear. Now you have to pay back the loans plus interest as well, which costs about 230 million dollars per year. Rising interest rates have come under pressure because of the banks, insurance companies, etc. included not only the true and only for the year 2007.

CVC shrugs and says that it is also the debts of the enormous revenues of the Formula One can pay back. And prior to the due date in 2014. And that's what the team is driving up the wall. For the missing $ 230 million at the end so the payout to the teams. And ask yourself, why should we save when there's enough money there, but that is not the only reason why is because, as an investor park his legacy from having to do with Formula One for next to nothing? Why must wade Williams in debt, if you as a team, together with others for such a great sport ensures that the masses sit on TV and let the money flow Sponsors why we doing this to us when we no CVC and its involvement with FIA, Ecclestone, etc. could be better there?

Good question, but a little unfair, because without the intervention of CVC had the Formula One end of 2006, as one after the church had gone bankrupt and EM.TV, the EU is interested in looking at the company construct the FIA ​​and Ecclestone and the banks, for the church and Co were stepped in, did not feel like been pretty bad there. Therefore one must also ask the question why the German banks were sitting on the majority of the shares were present, not in such profit prospects are still on it? I mean, worse than the bonds to Lehman, AIG strange Icelandic banks, the shares in Formula One but not really be, right?

Since I already arises the question of which bodies in the form of debt finance in the basement of the "Company" Formula One are really mean and what can be. For that you need a private financial services company that gets involved indicate that, at least outwardly, calculable risk Formula One, where you are also entitled to charge the series of holding companies with debt, who do not seem to Formula One is to say the least, strange. Especially with sports CVC previously had nothing to do.

The teams are irritated by all the opaque transactions, and that the article appeared in the Guardian, can not be a coincidence. The same time, the budgets of the teams make the rounds that, if we may believe the numbers are somewhat lower than expected. At any rate in part.

Toyota - 445,600,000 U.S. dollars
McLaren - 433,300,000
Ferrari - 414,900,000
Honda - 398,100,000
Renault - 393,800,000
BMW - 366,800,000
Reb Bull - 164,700,000
Williams - 160,600,000
Torro Rosso - 128,200,000
Force India - 121,850,000

The figures are derived from the Book of Formula Money and go around since September. I have since being here, but there is no confirmation of the book except for numbers, I see it more as an approximation value. Surprisingly, they already are, especially when it comes to the budget of Renault. Briatore was talking about the fact that only half of it at my disposal, what are the top teams. What would be approximately $ 250 million. If you believe the numbers, he has even more than BWM available. For Red Bull, the numbers are difficult to understand, because for one, no one knows what is put in Torro Rosso, on the other hand I do not know if Red Bull Technology's inside. When combined expects RB and STR, it also comes at just under 300 million what I regard as reasonably realistic.

So - and if you put these numbers into context for winning the Formula One (well over a billion dollars, but do not know whether or EBIT, or net of tax) is then clear why the 10 teams are pissed. Except for Williams and possibly Force India is not as if the teams would make losses. On the contrary. Gerhard Berger said this year of a two-digit million profit, which would enter Torro Rosso. This profit, and thus the total investment for another season, but one could increase significantly if the CVC would not write off contaminated sites and to simultaneously participate more in the revenue would be.

The CVC, in turn, looks at the teams seem as employees, because according to the "Guardian" threshed to requests for more money from, as the manufacturers would not, but a council make representations. They had so increased, according to the Guardian, CVC, the sum under the new Concorde Agreement already. Closing time.

The teams are concerned. Not only because they felt could get more money. The 20 million dollars more or less makes the manufacturers in the budget even more out of nothing. You are concerned because they are the financial burdens of the F1 are so high that the sport may have no crisis despite poor season in terms of revenue. A really healthy Sport is under pressure, which is also the reason why the Canadian GP Ecclestone has thrown out the calendar. Simply brings less money than, say, Bahrain, Dubai and Singapore soon. The rule is likely that Ecclestone pull some GPs have (Germany because of the manufacturer, Monza for Ferrari, Barcelona, ​​because F1 is booming there, Turkey, because he himself is organizer) and others (England, France, Canada, Belgium) in the moment can fall, where you can not meet his financial demands, and at the same time it gives countries (Russia, China, India) who wish to pay their sums. This was also the last to be clear why the Formula One on a continent like South America, where racing can move the masses, is represented by only one race.

But we should not now accuse Ecclestone flat, he would be all to blame In the end he must serve three sides. CVC who want a high return, the teams that want more money and the TV companies who want to see what their money. Although he has created this monster themselves, but can also be victims.

After the teams could have closed together in FOTA, the FIA, Ecclestone and CVC under pressure, because without the manufacturer's Formula One just an empty shell. At least until last Friday because Mosley is making every effort to outmaneuver the manufacturer a little. Until now it was so worn that the Formula One because of the cost for only one manufacturer was. The continued Ecclestone, as well as the FIA ​​under pressure. Adjacent to the budget but again at 50 to 80 million €, the thing looks different. It can afford to interested sponsors and smaller manufacturers have, for the marketing potential of F1's big enough.

Another question is what should happen when Ecclestone should die suddenly. With over 77 years so it is no longer the youngest. Probably all of the shares to fall to his wife only once, but apparently just looking for a divorce. A possible successor and probably the only one who knows the empire of Ecclestone, Flavio Briatore is that Ecclestone has combined several companies and built his business on a similar network, like the English.

As I said - the article is not 100% correct, but it is probably because a good approximation. Additional information in the comments please.

{Sources}
Daily Telegraph speculation
Bleacher Report report on losses of F1
F1 sport of F1 Losses
Pravda Forum Interesting analysis of the Mosley scandal
Google Finance page CVC
Wikipedia is not very coherent report of Wikipedia
Alianora La Canta The hard work of Alianora La Canta

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Formula One is a very secretive circle. Hardly anyone knows what is really behind the scenes between FIA, Ecclestone, the rights holder CVC, whose employee actually Ecclestone, the teams and ...