Explaining the mess at Caterham

Caterham Sports Ltd has  gone into administration. The London-based  Smith & Williamson accountancy firm of Moorgate, London has been named as the administrator. The goods that were previously seized by the bailiffs known as the Sheriffs Office have been passed to the administrator. However, there remains a dispute as to whether these items should have been legally removed from the team. The administration does NOT threaten the racing team, despite reports to the contrary. It is a complicated business but it looks likely that Caterham Sports Ltd will end up being worth very little. The Formula 1 entry, the most important asset, is owned by a Malaysian company called 1Malaysia Racing Team Sdn Bhd. This had an operating company called 1Malaysia F1 Team (UK) Ltd. This would later convert itself into 1Malaysia Racing Team (UK) Ltd and ultimately it became known as Caterham Sports Ltd. When the team changed hands in July the new owners must have either bought or leased 1Malaysia Racing Team Sdn Bhd, in order to secure the all-important F1 entry. This remains valid unless the Malaysian company itself is deemed to be insolvent in which case the Formula One group can terminate  the agreement and cease all further payments. This has not happened. Thus the F1 entry is valid as long as the team continue to appear at races.

It is difficult to ascertain exactly what has happened, but it seems that shares in some of the companies in the original structure may have been pledged in exchange for loans. If these pledges were not lifted the new owners could not take control and thus their backers could not reasonably commit money to the project. This probably explains why at the end of August, a parallel company called Caterham CF1 Grand Prix Ltd, which was owned (on paper at least) by deputy-team principal Manfredi Ravetto, was set up and seems to have taken over the running of the business for 1Malaysia Racing Team Sdn Bhd. This is perfectly legal. The operations of the team passed from one firm to another. The key question is who owns the assets (machinery, cars etc). This remains uncertain but when the bailiffs came to seize some of them a few weeks ago, they were stopped from putting them up for auction on the basis that they had no right to take them. This would suggest that they were not owned by Caterham Sports, but rather by either the Malaysian parent company, or by the independent Caterham CF1 Grand Prix Ltd. There is nothing wrong with a company selling its assets to another company owned by the same people – if  the assets were sold at a reasonable price when the first company was still legally solvent.

The administrators say that they are in discussions with 1MRT to see whether Caterham Sports can continue to supply the F1 team.

“Positive discussions were held between the administrators and the team manager, Manfredi Ravetto, and also with the financial backers of the team on Friday 17 October and it is hoped that these will lead to a financially acceptable arrangement for the continuation of the relationship between the company and the F1 Team,”  the administrators said. “If a financially acceptable arrangement cannot be agreed between the administrators and the Caterham F1 Team the administrators will then enter into dialogue with other interested parties with regard to a sale of the business and assets of the company.”

The key question is who owns what.

87 thoughts on “Explaining the mess at Caterham

  1. What are your thoughts on this “Judge13” character, who has been calling out Caterham as going bust and not able to race for a few weeks now?

    1. We ran him off of the PF1 forums a few years back when his blog was still in its infancy. He did nothing but post utter, utter shite on an industrial scale using anonymous ‘sources’ to back it up. Even a stopped clock gets the time right twice a day, i’d treat anything from his website with copious amounts of skepticism.

  2. “The key question is who owns what.”

    Like who owes which smaller suppliers that will never see their money despite providing goods and services to the now bankrupt company. Or who owes the payroll? Or who is responsible should any of the former staff (or contractors) sue for unfair dismissal (or breach of contract).

    And which of the management team will come away smelling like roses, whilst the little guys and girls end up on the compost heap.

            1. And I wouldn’t expect it to be.
              On the other hand though if one fields questions about the entity there just may be a pointer :-)…….

  3. Very strange story on the bbc about kobayashi posting on social media that his car was unsafe. Mentions in passing that Lotterer “refused” to race at Monza, which is how Kobayashi got the seat back. Do you know anything more Joe?

    1. Lotterer mentioned that he could not drive FP1 (because of Merhi getting that drive) and therefore refused to drive, because he needed to drive all sessions to prepare for the race.

  4. The much shorter albeit equally as accurate an answer/explanation being ;

    Caterham with very limited resources and a niche market product [ albeit one very cool niche market product ] made the age old mistake of trying to punch seriously well above its own weight …. and is now paying the price anyone with even so much as a modicum of business sense could of seen coming from a good 1000 km away . Then factor in the very big failure of the CaterPine project [ after massive investments on behalf of both Alpine/Renault and Caterham ] along with next to zero interest in Caterham’s ‘ engineering ‘ services and an abject lack of viable sponsorship for the F1 team and well …. here we are … just as was predicted by many … including me .

    My only hope right now is that the F1 debacle doesn’t filter all the way down to the automotive division … causing them in the near future to also shutter their doors

    When will they ever learn ? That unless serious change in F1 is enacted very quickly ….. the days of the garage mechanic or independently wealthy enthusiast making good in F1 have long since passed .. never to return .

    Hmmn … a lesson despite his money Haas is about to learn all too quickly as well

    1. Hmmn … a lesson despite his money Haas is about to learn all too quickly as well

      I haven’t been feeling that great for the past week but I’m healthy enough to see an opportunity here and ask you: wanna bet? Five years’ time says Haas F1 will have proven to be a huge success.

      1. Wow JP while I hope and pray (and I’m not prone to pray) you’re correct my common sense and betting instinct tend to push me the other way.

        Given the choice between a wildly successful business man who radically underestimates the challenge and cost or a guy who has it figured out, I gotta go with the former, not the latter.

  5. It’s almost reassuring, in a twisted sort of way, that the spirit of Andrea Moda has not completely vanished from the sport.

    I never thought we would again see a team boss who was so keen to sell a seat that he would resort to sabotaging his own driver. They haven’t sent Kamui Kobayashi out on wet tyres at a dry track — yet — or released him to start his qualifying run 45 seconds before the end of the session.

    But unexplained performance deficits that make sure Kobayashi finishes behind the boy with the $18M in his pocket, and parking him for a “brake problem” that they didn’t bother to actually tell him about — these are a fine start, and with three races to go it’s surely only a matter of time before they come up with something truly preposterous. Forget to load his seat into the container when they pack up for Austin, perhaps, or claim that the chassis was warped by the heat from all those burning bridges on the bonfire of goodwill…

        1. “In Brackley, Bicester, and Brixworth, bailiffs barely bother…”
          Been watching “My Fair Lady” again, have we?

  6. What are your thoughts on this allegedly being a scheme with Forza Rossa as the end goal? It seems fishy to me to say the least.

  7. Hi Joe
    Thanks for the insight. Am I right in thinking you had a connection with Caterham F1 team in the past? Is this still the case and if so how do you think things will pan out for 2015?

    1. No. I was a director of Caterham Car Group Ltd, a sister company of the team but not connected in any operational way.

  8. Where does Tony Fernandes stand in all this mess?? Is anyone questioning him about who owns (and owes) what….

      1. So Caterham is in deep financial trouble and has been for some time, but the 300,000 Lotterer paid is totally unrelated to him driving that weekend. uh huh, sure.

        How many laps did he do again?

        Oh right, he got to drive Free practice, but they retired the car during the race. did he retire the car, did the team retire the car, or did it retire itself?
        based on Kamui’s Facebook statements, seem’s like maybe Caterham got their check from Lotterer, and then saved the car for a later date….

        I do not understand how you can blindly accept the lies coming out of Caterham. Why is anyone in the press letting Manfredi get away with his contradictory statements? When was the last time an F1 team had secret owners? Does FRR have a license for 2015 or not? Is Kolles involved?

        I see a lot of speculation in your article:

        it looks likely
        the new owners must have
        It is difficult to ascertain
        it seems that
        may have
        This probably explains
        seems to have
        remains uncertain
        would suggest

        But no real answers.
        Someone needs to start asking some difficult questions.
        No one seems to have the testicular fortitude.

          1. the 300,000 to let Lotterer was paid by Hype Energy Drinks, the company managed by Bertrand Gachot. This was well reported in the Belgian press Joe and I am Belgian and read local press.

            1. This was coincidental and not the reason he got the drive. That comes direct from the team. And I am British.

        1. Hm, I wouldn’t know how much / if anything was or was not paid by Lotterer to drive TDf1. But I seriously doubt the team deliberately had him park instead of just running into an issue.

          Sure enough running things on a shoestring budget does mean getting closer to full mileage on parts than you might otherwise do, but its not as if its the same parts that have done Monza would be those on the car in Sochi.

          As for Sochi, its possible/likeky that parts got held up in the UK instead of being sent to Japan. But all teams had issues to get new parts sent directly to Sochi because of customs in Russia. It was even mentioned by Vettel / RBR as the reason why Vettel will take the engine penalty in the US, because they couldn’t get a fresh unit flown in. And I am pretty sure some teams mentioned new parts like wings not being on the car because of this too.

          Lets remember that Kobayashi himself made those remarks only to close friends / relatives on FB, and agrees that the issue was repaired later. It does give extra feed to the feeling the team really is running as low as they can, but only proves that they might have been right to pull him in during the race when they did see an issue.

  9. thanks for thr news Joe .. I was thinking that the F1 team, the GP2 team, The F1 licence owner company and the engineering structure was part of the Tony’s company Tune Sport .. is it true?

  10. They’re definitely trying to wing it aren’t they.

    It’s so far from good (or even poor) business practice that it’s difficult to see how they think they’ll ever reach objectives… whatever they are. Put yourself in the position of an investor and they pitch to you… “I’m out”

  11. It’s a real shame as TF looked like a bloke who would achieve something good. However once he sold up the writing was on the wall for all to see. Whether Caterham can continue or not depends much less on who owns the assets than it does on whether any supplier will continue to deal with them. I would expect anyone doing so will require cash on delivery of goods now, and payment for any previous unpaid invoices, this in turn could be where any continuation of Caterham ceases. It looks to me that Kolles and Co have only been trying to keep the F1 entry intact, and that would probably be for Forza Rosso or what ever they call themselves. F1 has long had too many seedy people in it, and all they are there for is to use the system of entries to make a quick buck. It won’t stop until Uncle Bernard goes. In the meantime I would think that a lot of quality sponsors who might join in, are put off by the spivs, wideboys and crooks who inhabit the pitlane.

        1. Libel is a complicated issue. The truth can only be told when the people concerned are pushing up the daisies.

      1. Fingers crossed the truth will out and I have no doubt your impartiality -even though you are very close to two of the major players involved- will help you write that expose.

        I am especially looking forward to the reveal of these Arab-Swiss buyers who are key to this whole affair.If they exist who are they and what are they playing at?
        If they don’t exist, who came up with the idea and why and who went along with it?

        Due to the nature of this administration and the sheer number of phantom companies involved there are a lot of reputations and personal credibility on the line over this sorry affair.

        1. I’m bored with people saying I am this and that. I’m not. I’m just reporting. I’m close to lots of people in F1, but they doesn’t stop me reporting fairly about what they do.

  12. You can argue about who owns and owes what, but surely this is the end of Caterham as an F1 entrant. Having been involved in a couple of administrations as a supplier, there is no way any company would continue to supply a thing unless it was on a cash basis. Although the administrator can obtain goods and services, this is a short term measure and unless more backers come on board, this will sink as surely as the Titanic.

    As always one has to feel sorry for the suppliers put in jeopardy and the workers laid off.

    I well remember Tony Fernandes boasting on the BBC how he succeeded at everything he tried and saw no real problems in getting to the front of the grid in three or four seasons.

    Sad.

  13. As clear as mud, Joe.

    Company A owns the F1 racing licence and it is not clear who owns Company A. The F1 licence is the most valuable asset.

    Company B owns or rents some property, also owning or renting machinery which can be used to manufacture F1 racing cars. Company B may own Company A (unlikely), or vice versa, or Company C owns both.

    Company B owes money to suppliers who will not be fully paid for their work.

    Disregarding ethics, Company A can legally reinvent itself.

  14. Dear Joe,

    again me. Sorry, you are not right again. And that is for sure not in relation with your previous engagement with Caterham road car.
    Good article, but you can not cover the truth with this words.
    In past it was more complicated, but this days we have e-governing everything, and, yes, especially in UK one are able (for a few pounds) to get all required data from registrar data base.
    So, my homework say:
    1Malaysia Racing Team Sdn Bhd was 100% owner of Caterham Sports Limited.
    We know that 1Malaysia Racing Team Sdn Bhd is now owned by “Swiss-Arab could be consortium”. And that is not changing fact that “Caterham Sports Limited” is fully owned by this “1Malaysia Racing Team Sdn Bhd” company and is that CSL is full UK company.
    So, there is no “unknown” details about who owns what.
    CSL is property of !MRT and is operational arm of paper company 1MRT which has FOM and FIA contract.
    Subsequently, as CSL is under administration, I challenge you to explain how it is not affecting 1Malaysia Racing Team Sdn Bhd and Caterham Formula 1 entry?
    If anyone can explain it at all.

    Your sincerely M

      1. Mikus, Limited Companies, end of discussion really, see my other comments, Companies House gives you details of Directors, shares in circulation and so on but Joe is right private share pledges could skew all that in reality. I could own all the shares in a company as far as Cardiff is concerned, but if a friend has lent me a tenner and has a lien on those then the Administrators will talk to him over me.

  15. It seems rather strange that Caterham Sports Ltd did have assets and now has none. As a creditor of CSL I hope the administrator will question where they all disappeared to. As usual it is the staff and the suppliers who get to carry the can, and the F1 cronies get to keep the cash.

    1. Have they disappeared? I don’t know. If they have then I am sure that will be looked into. There are laws but I doubt these folk are stupid enough to have broken them. The whole thing is a big mess and I’m still trying to figure it all out.

  16. Um just a couple of pointers here that might help clarify a few things. CSL who I have no experience of and don’t really give a damn about, are not however bankrupt, they are in administration, so being run by accountants basically who will try to trade them out of it or close them down but take their fees.

    These are all limited companies so whoever the shared owners are doesn’t make any difference whatsoever. CSL could go under just owing the milkman £10, the owners could have another company worth a billion pounds, but Ernie, driving the fastest milk cart in the west, won’t get paid.

    Joe I think it was made a good point. If someone at some Caterham company sold say a chassis to another company they also owned, but the chassis was for a Caterham F1 car, so basically only practically worth anything to Caterham F1, and let’s say it cost £100,000 to make, but they sold it for £25,000, then the administrators wil probably say fair enough, as at auction it would make £5k or something. If Caterham company A sold it to Caterham company B for £5k then questions will be asked, if it’s £50, then there’s naughty stuff going on, although I’m not suggesting there is.

    Caterham didn’t get over ambitious with the F1 team, as the F1 team existed before TF bought Caterham, it was branded Lotus, seems like a lifetime ago.

    Having said all that, it’s a terrible terrible mess and as wonderful and exciting as F1 is, and despite the huge passion of everyone I’m sure working at all the various companies, they are real people with families homes and bills to pay so they must be desperately worried about their future so good luck to them.

  17. BBC are writing that CSL builds the cars for 1MRT who operate the team. sounds similar to Red Bull Technologies and Red Bull Racing set up.

    Assuming all goes well for 1MRT, who will build the cars next year and where?

  18. > “The key question is who owns what.”

    Is it though?

    If 1 MRT owes money to CSL for services rendered, and CSL have physical possession of the cars, then even if they don’t have title, can’t they just put a lien on the cars and refuse to release them until the debt is paid in full?

    I don’t share your confidence that Caterham will be in Austin. (Unless I’m misinterpreting you, and neither of us is confident of that).

    1. Since my days of clashing with some folks here about lotus the car group a long while back I’ve tried to keep my comments to the practical lol. So, I don’t know if 1MRT owing money to CSL is an issue in this, it might be, and I’m not being obtuse, It might be that there is no money in the pot to pay with, a slightly different thing.

      The issue I think is simply CSL owing someone, or a range of people, money. I’m guessing there will be suppliers, and I think there’s one on here, it could be racing related materials or goods, metal stock, sheet carbon, or the rates, the water – but also VAT and HMRC, the big ones.

      If the F1 operating company, the team, has the parts to run, or suppliers (possibly suppliers to CSL, sub contractors) who will deal on a cash basis, then they could well struggle on to the end of the season.

      No one at Caterham is going to be making updates now given the situation, Renault have enough issues with power plants so they won’t worsen things by seizing engines if there’s a bill outstanding, chances are the team will scrape to the end of the season, lay everyone off, mothball and try to sell the entry with some cars and the IP for the designs.

      I speak from the experience of being the Commercial Manager at TOMS in Hingham during our ill judged and il fated ‘build our own F3 car’ phase in the 90’s – suddenly that experimental wing tried and discarded in April might be back on the car, and there will be some engine covers and other damaged ‘rainy day’ spares that get patched up and used.

      Joe will tell us how things like fuel supply and tyre supply / payment work in F1, it’s access to those things that can stop the team – or no cash for flights and so on.

      F1 is a franchise sport so given that with respect, despite all the hard work, the IP of the cars is worthless as they are not winners, then the only remaining value is in the entry ownership, but one would hope that a potential new owner could see the value in acquiring the services and skills of the people who have been brave and determined enough to go down with a sinking ship.

      The Caterham staff on the shop floor must be going through hell, I know what it’s like not to sleep at night worrying about whether the bills would be paid, so were it me setting up a new team I’d have all those staff on board ASAP because they will be willing to graft for a guaranteed wage.

      What a new owner should do as a first move though is lease a nice big metal shed on a sparkly new industrial estate where some local council will give them a grant to move in, and run the hell away from the forever cursed Leafield site!

      1. Thank you for that, that’s very interesting. And I do feel very badly for everyone at Caterham.

        What I was trying to get at was that, since in real life (if not legally) 1MRT and CSL were owned by the same people as part of what was logically a single business, then 1MRT would get -all- the revenues (appearance money, sponsorship, fees from drivers etc), and CSL would only be able to pay its trade creditors if 1MRT chose to finance it. Equally, the only reason that I can see why CSL would not be paying its creditors would be that 1MRT chose not to fund it.

        Now, if you’re suggesting that 1MRT didn’t have the resources to fund CSL, then that I think raises questions about whether the new owners had the money to compete. And if they have the resources but have chosen not to use them, that might raise…other questions.

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