I don’t know about you but I find Formula 1 to be a constant source of complete amazement to me. A while ago Renault F1 (a company that is owned by a Luxembourg investment whizz called Gerard Lopez – not to be confused with a large French car company that owns a small share of the team) announced that it had agreed a deal to run the Russian driver Vitaly Petrov in the second car this year. The rumours spoke of Petrov having a horse-choking wedge of cash supporting his candidature.
When it comes to Russia, of course, one does not ask questions about where the money comes from. I am sure there is plenty of legal business in Russia these days, but I would not put a penny into the place because of the crooks that are there and the corruption that exists in the legal system.
Anyway, Lopez seems like a smart man and if he agreed a deal with Petrov he must have had a decent idea that he would get the money that was being promised and that the cash was kosher. No sensible businessman does a high profile deal like that on the off chance. So he must have been confident that the cash is coming. Thus it makes little sense when one hears the heart-rending tale of Petrov’s dad going to a bank manager and asking for a loan for $15m.
What chance would you or I have if we went down to Barclays and asked for that? Even at an annual interest rate of 8%. Small wonder the bank wanted his house as collateral… And one can only boggle the brain about the size of the said residence.
If the reports from Russia are to be believed (and there is no reason to doubt them) Petrov is due to pay Renault F1 the sum of $7.5m on March 1 and another $7.5m on July 1. It seems that this money will come from “a St Petersburg Bank”, as Petrov’s father knows the chairman. One must assume that this is a private bank as the chairman of a public financial institution would hardly invest in a business that would sink $15m into a racing driver, just because his dad knew the chaiman…
One must also ask the question of how Petrov’s father has been able to get letters of support for his son from Prime Minister Vladimir Putin and others. If I wrote to Gordon Brown asking him for support I fear that I might not get a reply.
Who knows what is going on? None of it makes any real sense. The rumours of Petrov’s money mentioned a deal with Sberbank. It is headquartered in Moscow not St Petersburg, but its chairman is German Gref, a former government minister, who worked with Putin between 2000 and 2007… but would he really agree such a mad loan? And would Lopez really accept such a deal?
Hey-ho. It’s a colourful world, isn’t it?
money appearing out of nowhere
letters of support from politicians
This stinks of the russian government pulling strings left right and centre in my opinion…but for what ends?
Just to get a russian in there? Or is there more behind this?
Renault…Russia…hmm…
mighty suss…
I’ve got relatives living in Russia and it’s very well possible in Russia that you will get a million dollar loan from a bank simply because the chairman is your friend. And getting a letter of support from Putin is nothing special either, if you really know him.
In Russia there are no borders between business, politics and friendship. You can do anything you want as long as you have the right connections and access to money – from whatever source.
We live in a colourful world and believe me, Russia is the most colourful (and most corrupt) of all countries.
If it was good enough for Nikki Lauda, then it is good enough for Petrov in my eyes. Inflation clouds the picture surely?
There is no end to the naivete team principals can show when it comes to sponsorship money. Peter Windsor and Adrian Campos are still waiting for angels to send money from the heavens.
Reminds me somewhat of Justin Wilson’s daft notion of selling shares in his own career as a way to finance a Minardi drive. Investors in that scheme are known to be holding large sums of highly-valued tulips and sub-prime mortgages in Florida.
It seems odd to me that a team would do a deal where the first installment is not fue until two weeks before the first race. If the money turns up missing the team has lost out on the chance to sign any number of other drivers and are certainly not going to find a driver who has any real money to spend.
Surely anyone signing a driver for the money he can bring would want part of that paid early enough that other drivers with some kind of budget would be available.
This smells like rotten borsht to me!
Any money coming from a Russian bank would not necessarily be the result of a bank manager’s deciding to take a punt, or to indulge in fraud or embezzlement.
More likely (in the scenario sketched out) the funds to Renault would be via a bank loan against non-cash assets that were pledged by the driver’s backers.
On the issue of writing letters, I did once write to Bernie (about bringing back the USGP) and got a personal reply. I have no clue if he even opens them, but I have sent him a Christmas card every year since then as a bit of thanks for his time in responding to me.
As for Petrov, if his funding did fall through, who else on the prospective driver market would have anywhere near that type of cash to put up for a seat?
You mention that it is a loan… how is one going to be able to repay a loan if it is provided as funding for the team. Certainly the team is not going to give it back at the end of the year. Are they hoping on Petrov becoming a sensation and getting hired into a Ferrari (etc) at 20 million a year in a couple years time? Or is it based on a loan give a personal sponsor a moving billboard on Petrov’s driving suit, but it will cost you 7.5 million for the left or right pectoral.
Back to the good old days of dodgy rentadrivers, eh?
Dont think this stinks as much as one might think, if it did smell funny, then money wouldnt be a problem.
Seems like after approaching every large Russian company and coming up empty handed, Petrov was told it wasnt going to happen. Few tears later and daddy put the house up as collateral.
Wish him luck.
The naivete, or perhaps it would be more charitable to call it optimism, of some of these new team principals is astonishing. Go for a pay driver if you must, but at least get cash on the barrelhead. Or maybe there’s no cash to be had from anyone, and any team, even Renault, has to swallow hard and stake their existence on eight-figure personal loans to the driver’s daddy.
But in any case, how different, how very different from the home life of our own dear Sir Frank. Say what you like about his somewhat gimlet-eyed attitude towards salaries or the declining sporting returns of recent years, he has always made as sure as possible that the future of the team was secure.
One wonders, actually, if Toto Wolff’s coming on board was to fund the repayment of loans from Frank and Patrick to the team to keep it afloat during the Manufacturer Superbudget Era…
Translation of the official press release:
===
Recently many Formula 1 publications brought their attention to speculations about Renault F1 Team and Vitaly Petrov. Driver’s managers hereby refute all rumors that could have appeared from incorrect interpretation of driver’s father words.
We want to inform everyone that Renault F1 Team and Vitaly Petrov’s management reached an agreement and signed a contract for 2010, obligatory for both parties involved. Vitaly will take part in all 19 Grand Prix of the FIA Formula 1 World Championship.
Currently the driver and the team are preparing for the next round of the official F1 tests, which will take place on Feb. 10-13 in Jerez.
We won’t comment on this topic anymore.
===
Looks like F1 is going to be even more about the haves and have-nots. Witness the lack of sponsorship on the Renault and Saubers, the Campos problems etc etc.
Looks to be a battle between Ferrari McLaren Red Bull and Mercedes with the others trailing a long way behind. Will be interesting to see the gaps between the front and back of the grids at season start and finish
And F1 wonders why more people are watching Moto GP….
Joe, further to the Sberbank notion I read at Will Buxton’s web site:
“Petrov’s signing to Renault came amongst speculation that his ride was being funded by Russian oil and gas corporation Gazprom, however Alexander [Petrov] told mk-piter.ru that this was incorrect.
“It would be better it were true! But, unfortunately, this is just fiction. If in fact, Gazprom had sponsored us, then the car would have their inscription.” “
The story has been denied by Petrov’s people, saying that Daddio was misquoted. The more I look into the story the less I like what I found, but I guess that Petrov is a very common name in that part of the world. If you search for Petrov and Putin you start coming up with criminal busts in Valencia, Spain… The best thing I guess is to see what happens…
Joe, think you should be a detective!!
Vulture Capitalists
Just watch… DaddyPetrov brokers a deal between Sberbank, Serbank fails payment then somehow Lopez owns a Russian bank. Business-to-Business Platform
I knew pit-passes were hard to come by, but thats a mighty expensive way of gaining entry to the paddock
Truly bizarre.
Scott, the Justin Wilson idea was not so daft, because Justin’s wages are partially ringfenced for paying back investors until 2012 unless he earned enough that investors’ investments were doubled before that point. I don’t know if the investors have the doubled money they were promised yet, but I think Justin’s been salaried in American racing long enough that they must be a long way there.
I do, however, have trouble getting my head round the concept of taking out a $15m loan to get onto the grid. Especially since Vitaly is sufficiently talented that he should have been able to join in F1 for a much lower amount. There is some serious illogicality going on and not just with the loan…
I must say the latest round of new teams and moves at teams such as Renault and Toyota does remind me of some eras in the past (if i remember correctly) where the backers of some teams seemed shall we say to be a bit ‘smoke and mirrors’
Joe, that’s what I love about your blog. You write what you wish to say. My experience of the Russian (and Soviet) business world leads me to respect you as having balls! They can be horrible. We’ve all seen and read about the Sicilian mafia, who in comparison are quite ethical. However, Russians have pride in honour. If the money’s going to be in the bank, it will be in the bank.
Like you Joe, F1 will never stop amazing, or is that amusing – me. I want to say it was never like this in the old days, but I guess it was.
People got into it first to Compete, pure and simple but it cost. Then it got even more expensive so people began to compete in a different way, using money as a weapon. When Bernie used the ‘Satellite/full series only tv contract’ combo to combine, some national Grand Prixs into a fortnightly international TV show. Great. F1 went almost beyond money into the realms of global business. It became a biweekly, consumer marketing splurge, with wopping global reach. The Sport of F1, my old sport, was used – and ultimately maybe even consumed by the money business. None of which is particularly wrong. I actually applaud it all in a way. In pure business terms its been very elegant . Its just that – I think I’ve lost my sport
Now we have teams, circuits, cities et al dancing and dicing up the action, into ever more interesting financial moves, spreading it around Investors, governments, Banks, Boutiques – and probably the owners of senior debt in Etc Etc Cayman Financials Corp Inc for all I know – deals crosstrain deals in a never ending whirl to meet financials, sales and branding targets going forward – and ultimately deliver the all important cash, monthly, to the owners of the sport – a financial investment fund. I am completely bewildered.
No longer might team owners say to drivers ‘We like your style; you’re good, you’re a racer, sign here – lets go racing’ Its more like – ‘We’ve been looking at your potentials and financials .. going forward they look good; we can do a deal, a part of which involves driving a car; dont worry you’ll pick it up..
I mean, a Russian Bank ‘reviews the financials for a loan, collaterised, for $15m – to go racing – but also notes high level Govt support for this rather unusual and tenuous transaction. Approves loan. An Investment Co in Luxembourg looking for someone to drive a car in their sports portfolio awaits transfer…
I’m not particularly aiming at anyone BTW – if I offend I,m sorry its just that ……
Somewhere in all of this, somewhere away in a corner, all on its own, is a motor racing championship that this old duffer remembers and wants to bring back and love again…..
Probably blathered on too much, Joe. In my cups. Past it. I’m going to get bumped right?
What the heck – new season starts soon….!
I’m not sure how an entire interview (or at least a whole segment of it) can be misquoted, but I will give them the benefit of the doubt.
Ultimately, the proof of the pudding (the money) is in the eating (or in Petrov’s case, the racing).
Mr Saward,
I notice that you repeatedly adopt a hostile tone when confronted with a statement with which you disagree. Worse still, you will resort to your stock response of ‘if you don’t like it, don’t read it’. Please treat your reader’s opinions with a little respect and try to appreciate that they have taken time to comment on your blog which would not exist if not for them.
You may have access to more ‘privileged’ information than the average f1 fan as you claim but this does not automatically make you impartial. You may wish to consider whether your alleged personal knowledge of those individuals involved might cause you to have a more biased opinion than most neutral observers.
You claim that you ‘state the facts as you see them’. This very statement belies your own partiality; a fact is something that can be proved beyond doubt and you offer no proof for your opinions which are based purely on sentiment.
Most importantly, being a self appointed expert on F1 does not imbue you with the authority to make disgracefully sweeping and offensive statements such as ‘Russia is full of crooks’.
I don’t like and I won’t read it.
Interesting that the “Invest in Wilson” scheme has been mentioned. Maybe that would be a good article for you Joe. From the very limited information that I have, the shareholders have seen no returns as of yet. The annual statement comes through saying that after management fees and Wilson’s salary, no profits have been made. Interesting how Wilson’s manager is Jonathan Palmer who has made some “interesting”life and business decisions in the past. Anyway, a good article as always Joe.
Joe, you’re right, Petrov is something like 10th most popular last name in Russia, and it’s also used by other Eastern Europe nations (I think it’s one of the most popular names in Bulgaria).
BTW, the bank you’re looking for is “Saint Petersburg” (http://en.bspb.ru/), according to his manager’s inverview (http://www.championat.ru/auto/news-407022.html — in Russian).
According to this article (http://www.lenpravda.ru/digest/spb/254942.html – Rus), this is the “unofficial” bank of St. Petersburg’s administration (mayor’s son works here).
The bank was founded by Yuri Lvov, who resigned in 2001 and went into government as a deputy minister of finance (http://www.stockmap.ru/news/024722/ — source, Rus). He then resigned and was appointed as a chairman of another bank.
I’ve noticed a trend where people bemoaned the influence of manufacturers and have show a certain amount of glee at their general downfall.
I think its a case of beware what you wish for. The gap caused by their departure is rapidly being filled by governments. This has some very serious risks for the sport.
The spats and infighting the manufacturers could get into pale when compared to the dustups in international politics.
What happens when a government decides to give its team some ‘extra’ support during a local race? Visas can be denied to key opposing team personel, or even trumped up criminal charges can be levied. Equipment can be held up in customs, or siezed due to suddenly discovered ‘tax liabilities’.
What happens if religion tensions between india and pakistan flare and force india is in a muslim country for a race?
I remember when the olympics became a political football in 1980. To me it looks like F1 is going to be vunerable to the same problems as governments get more and more involved in sponsoring teams.
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