Tony Fernandes has now responded to the suggestion that the Caterham Group has failed to sign over the shares in Caterham Sport Ltd. This is rather more than yesterday’s Twitter remark, but it does little to clear up the situation.
“In June 2014, I decided, together with my co-shareholders, to sell my stake in the Caterham F1 team,” he said. “We agreed in good faith to sell the shares to a Swiss company named Engavest on the basis that Engavest undertook to pay all of the existing and future creditors, including the staff. The continued payment of staff and creditors was so important to me that I ensured that the shares would not be transferred to the new buyers unless they complied with this condition. Sadly, Engavest has failed to comply with any of the conditions in the agreement and Caterham Sports Ltd (the UK operating company of the F1 team) has had to be put into administration by the bank, with large sums owing to numerous creditors. Our agreement with Engavest was very clear: there was no legal obligation to transfer the shares to them unless certain conditions – which included paying creditors – were met. Those conditions have not been met. Our lawyers have asked Engavest several times to comply with these conditions but they have failed to engage. If you agree to buy a business, you must pay its bills. They have breached that promise and now, sadly, it is others such as the employees and the fans of the Caterham F1 team that will suffer if the team ceases to race. I sincerely hope that this will not be the case and that a solution can be found.”
Thus we have two versions of the story. One presumes that all the money owed was written down in a clear manner so that the buyers knew exactly what they were taking on. If this was not the case, one can see why they might feel aggrieved. The lawyers will no doubt one day sort out who is right and who is wrong, but on paper it seems that if Fernandes still holds the shares then he still owns the business and if he is so keen to protect the employees then perhaps he should step in and do the right thing and get the team moving again. If that does not happen the team is dead. The parties involved can go on arguing on who killed it, but the result is the same.
joeblogsf1 
At least in US sport leagues, potential team buyers must be vetted for suitability by the league central office. It seems like F1 and Fernandes1 missed this lesson. But then, errr, look at who’s running the show.
Yes in the UK we have a ‘fit and proper person’ test for soccer team owners. It isn’t the most stringent of tests but at least it exists! More than can be said for F1. It would be a bit awkward if a death ever happened that was found to be the liability of an unknown and unvetted owner. Or to take the point to its most extreme conclusions, if a team turned out to be owned by extreme right wing fascists.
Presumably Fernandes will pay the creditors himself then, seeing as he and existing shareholders still own the company?
He never paid them before he attempted a sharp exit did he?
Equity owners are under no legal obligation to inject capital that would be required to meet financial obligations.
Have you had any dealings/meetings with Fernandes? I ask as he seemed to come across as a decent sort – I know he’s a successful business man, and I’m not naive enough to realise that certain personalities cannot achieve that – but his public persona certain was fairly positive. This story may well shift this, so I was wondering if you had an opinion?
Irrelevant to the situation and the poor employees obviously, but just interested.
He does come across as a very decent, energetic and inspirational type.
I’ve met him on a few occasions and agree with you Joe, but he’s a dreamer who’s been lucky with one business that makes money and lots that dont, now we’ll see if he’s a really decent man or just a showman trying to copy Richard Branson.
I find it quite funny from the professional point of view, but I feel sympathy for the team.
Fernandes still owns the business? because he has conditional shares pledged to Engavest? He’d likely transferred the operatorship on token sum in July and pledged remaining non controlling shares on the conditional basis.
I suspect Fernandes will not be liable to creditors now. He will lose his shares as they are of null value now unless Engavest pays the creditors.
Two people can view the very same incident and give 2 completely different summaries of what happened. The “truth” is an odd thing
Marge Simpson: You liked “Rashomon”.
Homer Simpson: That’s not how I remember it.
That’s where lawyers make their money
I think what we are witnessing is the classic cycle of naive team ownership groups:
1. Team owner, desperate to sell, puts word out that team is for sale
2. Group of excited would-be owners performs some level of due diligence, noticing that team is worth nothing because future revenues are cancelled out by current debt. (Note that many smart business people, on discovering this, would head in the direction of Away)
3. Ownership group agrees to buy team for $1 or equivalent. With much fanfare, change of ownership is announced, with grand and excited promises of “new era”, “great future” etc. etc.
4. New owners rapidly discover that running a back of the grid F1 team requires continual large infusions of dollars since sponsorship revenues are too small, they become dismayed
5. New owners, unwilling to keep feeding the dollars machine, resort to all manner of tactics to cut back on the dollar outflows
6. Team spirals down into the dead zone due to debts, suppliers begin to fire legal paper, employees quit, sponsors and business partners run in the direction of Away
We are somewhere between 5 and 6 at present, with the team heading the same way as HRT did. There is the added complication that according to the previous owner, the new owners have welched on the deal because they would not assume the debts as agreed.
No doubt the new owners have a different story, but as recent news makes clear, the end result may be the same no matter whose story you believe. Very sad.
You’ve missed one point: Colin Kolles knew exactly what is necessary to run the F1 team.
That’s why it’s hard to believe this pretty ‘new owner’ story.
Good point. I wonder if he’s owed any money himself? There’s something a bit mysterious about this guy. He’s like a cleaner.
Kolles certainly knows how to run an F1 team on not very much money…but “not very much” money is still a lot of ca$h per month. That is where I think the new owners, like Thesan Capital with HRT, suddenly realized just how much money they needed to put into the team just to keep it going, never mind updates that would be needed if they wanted to have any chance of scoring points and snagging the 10th place Constructors championship money.
So it is bye-bye Caterham F1 another minnow bites the dust.Whilst Mr Fernandes appears to be decent type,they are signs that his business empire is showing signs of crumbling.
So if the deal is void because the purchaser didn’t comply with the condition, doesn’t that mean that Tony Fernandes and his co-shareholders still own the company? if they feel so strongly that the creditors including the employees should be paid, why don’t they pay them? I appreciate that the company is a separate legal entity, but is he blameless?
Hang on, the team, whatever it’s called now, was bought by Fernandes as Lotus. He then lost a legal battle and had to resort to the less than inspirational name of Caterham, which he did at least own.(I think)
He spent a lot of money to fail.
It now seems that he has “sold” the team and now wants to hold the moral high ground as some sort of benevolent owner who only sold out to give the team a sporting chance of survival.
Sorry, the guy is a shit
Please learn what happened before making silly comments insulting someone you don’t know.
The team was not bought, it was set up by Fernandes and his fellow business members.
He won the court case for legal right to use the Team Lotus name, he didn’t lose. Although by this point he had bought Caterham and it made more sense to use the name you have freedom over rather than one that you have usage restrictions applied.
To be fair to Tony when he got into F1 there was supposed to be a budget cap coming that never materialised. He got screwed over on the Lotus name because Mr Bahar suddenly saw some value in the name in F1.
I liked the way the team started out, they seemed to be the first one to make good use of social media and fan interaction.
Sadly Tony realised with no budget cap it was never going to work and looked for a way to cash out.
Also looking at his other businesses he seems to do more good than bad.
I may be proved wrong but my feeling is that he’s been a shrewd business man in the way he’s worded the sale contract and the new owners didn’t fully realise their responsibilities when buying the team. As I said though, I could be completely wrong.
He didn’t buy it actually, he funded, or fronted the funding of, the startup. He and Mike Gascoinge acquired the Team Lotus name from James Hunts brother. Honest.
Fernandes didn’t lose the court case over the Lotus name. There were two entities: Group Lotus (road car) and Team Lotus (F1 Team). The judge made that abundantly clear. However, no one came out of the court case with a victory. Group Lotus came in for its fair share of criticism. Fernandes sold the rights to the Team Lotus name, having bought the Caterham brand.
Having said that, he appears to be doing his best to kill the Caterham brand. If the new ‘owners’ don’t actually own the company as they have not met the conditions of sale, I thought the business default back to the original owner. So Tony should pony up the dough to clear the debts, or his reputation will go down the toilet.
Well said Martin. The question is Why the hell would he sit back and watch the Caterham brand being dragged through the media when he owns the car brand itself!!
Because he didn’t have anymore money to prop up the team any longer!
Hence the debts and the staff / suppliers that have been shafted !
If he has the money he’d be taking it back under his control without any thought to try and put it right, not just because it’s the moral right thing to do, but also to save the his Caterham brand?
car company next?
Is this why Engavest has remained anonymous because they had no intentions in paying and thought (or were led to believe ) they could make a go of it without any infusion of cash?
They have walked away quickly, had no checks and balances (F1 doesn’t have any requirements on buying existing teams) and nobody still to this day knows who they are.
I think TF has a little more credibility on this one, now let’s see how he moves forward.
You jump to a lot of conclusions
Some more info for you all on UK law:
Administration of the company basically freezes all share transfers and generally will mean that they have a nominal value of zero. Depending on the outcome of the administration I think you may be able to write-off the difference as capital losses.
A report will be made on all directors of the company for the past three years and will include a report on the suitability of directors with the potential for disqualification if, for example, they continued to run the company despite it being insolvent !!!
The responsibilities of directors and upper management to run the business will cease. From the point onwards of being in administration, directors, etc. are responsible only for providing information about the company to the administrator with possible assistance roles.
I am personally writing to the Sercretary of Business, innovation and Skills tonight to ask him to personally look into the activities of Tony Fernandes. Graham Macdonald and others as directors of the company and recommend you all do likewise, but in the meantime, claim and counter-claim become even murkier, with claims that the cleaner was down as the only director, people breaking in to filing cabinets, etc…
It will almost certainly be a film/book in years to come anyway….
As has always been said, it’s easy to make a small fortune out of motor racing as long as you start with a large one. In my view most of the teams are financed on a wing and a prayer and others are constantly transitioning though owners all hoping to make money. I doubt Caterham will be the last failure this winter.
So how does this team ever make money then if they haven’t scored a point? Is there a basic show up and we give you $$?
It seems odd to have so many teams be involved, but have 0% chance of a podium.
So from all these statements over the last few days, 1 thing is abundantly clear. Nobody has the cash to pay for caterhan any longer. They have no credit left, no money in the bank and are a couple of championship points shy of picking up a few quid at the end of the season which would cover the cost of going racing next year, and nobody is willing to take the gamble on those points.
Joe, With Caterham now the 2nd of the 2010 class of new teams that’s shut it’s doors, would it be a fair assessment to say Max Mosley’s plan to have small teams with low budgets able to build cars which had no RPM restrictions on engines would not have produced a 2 tier formula (as happened anyway!!!) but would have allowed those small teams the opportunity to compete with the bigger teams but probably wouldn’t have left the mclarens and Ferraris chasing caterhams around?
I don’t that was ever a serious proposal
Sad story…
Joe,
It’s now being reported that Engavest have replied to Fernandes with an new press release.
Which claims that “Engavest sold CSL”.
Do you have any information on whether this is true, and if so to whom? And on the basis of what contractual arrangements between CSL and 1MRT going forwards?
Since CSL seem IMO to have no likely significant source of income besides any payments contracted for or received from 1MRT, this makes no sense to me at all. Besides the fact that if it was true, one might have expected Ravetto to explain this before now…
If this is true, I withdraw the comments I made about TF yesterday (IF this is true)
I dont withdraw the comments about the other team boss . . . But maybe I’m just trying to save face by being right at least half of the time? Point is . . . Perhaps we should all wait for the facts before making judgement. At the end the whole saga, the reality is that a few hundred employees are facing an uncertain future at an unreasonably expensive time of year, and we’ve probably lost another team from OUR sport. Who next?
This is what I have been doing.
“Who next?”
Marussia.
This is as likely to work out as Joe’s claims that NBC viewing figures shoot up when Rossi drives.
That’s what I was told!
I was told my neighbour is hiding a live Dodo in his shed.
Must be true. It’s what I was told.
Well, if you don’t like reading what is here, you are quite welcome not to waste your valuable time.
Don’t begrudge your commenters a condescending zinger. We certainly don’t begrudge you them! In fact, I think most secretly like it. Or they wouldn’t stick around.
Sorry I didn’t realise it was your blog. I do apologise…
Talking of which – and Joe may have access to a fuller version of this – the TV viewing figures of the Russian GP have been reported in the Russian media. Apparently the tickets sold like ‘hot cakes’ (in the words of the deputy prime minister!) but the viewing figures were about the same as the average football or hockey match – 1.4% of the adult population – and lower than nine of the previous rounds this year. According to the article, the most popular GP on Russian TV so far was the 2010 Bahrain Grand Prix – which might explain why they didn’t tune in again,,, See: http://izvestia.ru/news/578391
I read a quote from Mr Fernandes that said “”If you buy something you should pay for it. Quite simple,” Perhaps if he had followed his own advice we might not be where we are with this sorry mess to-day.
Anyone that thinks this will end well is in cloud cookcoo land. This is such a last minute and desperation lead senario that it doesent bare thinking about.
There are no winner in this deal, only loosers, and the people at the bottom of the food chain, employee’s and suppliers are the first and worst losers. Sorry guys.
All will be ok now!
I read that Bernie is going to help sort out the mess and save Caterham. Though to be fair, on the same day I also read that Bernie said Caterham did not matter and we were better off without them and such teams.
According to the BBC, Bernie has said: “We’re trying to help in any way we can, which we do with anybody that has run into a bit of difficulty”
Which is rich, considering he doesn’t even negotiate with any of the back row teams concerning contractual agreements and otherwise appears to totally ignore them.
It all depends on if/when Marussia will field their second car again. Bernie MUST make sure there are 20 cars on the grid.
They have to field a second car.
Alexander Rossi?
Yeeees……a bit like being assured by a great white shark that he won’t
eat you…. ….. honest ?
This whole situation stinks of things we don’t really know. And I can imagine a great many Caterham employees are sending out a lot of CV’s
What a tragedy.
It appears the TF Statement can be summarised in a few sentences:
We ran the business into the ground and then ran away from F1 when the debts got too much.
We are surprised that the new owner wasn’t overjoyed to take on these debts.
Mr. E. does vet prospective team owners, he just doesn’t do it very well. The problem isn’t the new Caterham F1 team owners but rather the Fernandes ownership. Ever since the Lotus name cock-up this has been badly managed.
I don’t doubt Fernandes sincerity or enthusiasm for F1. But the point is, he seems to have now bailed out of the F1 team having run up a wide range of debts and therefore not running the business properly. And now he’s surprised the guys he sold the business to are unwilling to bail out the business debts he supervised. Its a crazy way to run a business let alone an F1 team.
Statement from Ecclestone this morning according to the BBC:
“I only know what I’ve been told. Don’t know how much of it is true.”
Think it’s about the only time I’ve ever agreed with him.
Joe, there have been rumours that Marussia’s financial troubles may very well make it miss the Austin race as well as Caterham. Are these plausible and should we expect to see only 18 cars next week?
If there are 18 cars, Bernie is in trouble
Good news Joe. The Admin has been reading your articles and decided to comply with advices:
“O’Connell says Caterham worth more value if team keeps racing”
Adam Parr might not be wrong after all!!