McLaren takes legal action to secure ‘urgent’ funds after investors block loan move
The McLaren Group has launched legal action in an effort to secure urgent funding and to keep it from having to sell a stake in its Formula 1 team, it has been reported.
McLaren said it is facing an “impending liquidity shortfall”, which requires new funds to be injected “no later than 17 July” due to financial hardship brought about by the coronavirus pandemic.
To solve its financial woes, the automaker has tried to raise additional funding by securing a loan against its heritage collection and Surrey factory (pictured), which could raise as much as £275 million ($342.7 million).
However, a group of existing investors have blocked the move, claiming a bonds issue in 2017, which raised more than £650 million worth of funding for the business, is already secured against those assets and therefore cannot be used to secure further funds.
Stating it needs “urgent” refinancing to address “severe and unexpected financial difficulties”, McLaren is now seeking a High Court order that would allow it to use its assets as collateral.
Last week, McLaren was granted an expedited hearing in London to determine if its proposed refinancing can go ahead. The hearing is due to take place next week.
Court documents show shareholders injected a further £291 million into the business in March to “provide the group with ample liquidity in order to fund its business plan” – part of a total £500 million invested by shareholders in the past 18 months.
McLaren claims the all the cash injections have been spent as a result of the coronavirus pandemic.
Mumtalakat Holding Company, Bahrain’s sovereign wealth fund, is the majority shareholder in McLaren Group, with a 56 per cent stake, while Swiss-based TAG Group led by Saudi businessman Mansour Ojjeh has a 14 per cent stake.
Canadian businessman Michael Latifi acquired a stake of around 10 per cent in 2018.
In the court documents, McLaren said: “The scale and impact of the pandemic quickly became apparent to the senior management of the group.
“The start of the F1 season has been delayed. Car dealerships have temporarily closed; supplies have been interrupted; manufacturing has been suspended or impeded; customer orders have declined; sponsorship revenues have fallen and additional costs have arisen from health and safety measures.”
Sales of its cars have sunk to an all-time low during the shutdown of its factory, while revenues from Formula 1 have also fallen due to fewer races being staged this season.
In the first quarter of 2020, the group – which is comprised of the Automotive, Racing and Applied divisions – reported a pre-tax loss of £133 million.
Last week, it was reported McLaren is considering selling a stake of up to 30 per cent in its Formula 1 motor racing team to raise the necessary funds to guide it through the coronavirus pandemic.
The partial sale is understood to be a last resort once other options are exhausted.
Las month, it announced it would lay off 1,200 employees – 70 from its F1 operations – as a result of the British government refusing a £150 million business loan.