McLaren takes legal action in refinancing battle

McLaren has successfully applied for fast-tracked legal action in the UK courts in a battle for urgent refinancing in needs to prevent a cash shortfall.

McLaren takes legal action in refinancing battle

The action concerns existing security held over the Woking facilities and the collection of heritage McLaren racing cars in relation to a previously issued bond.

In essence, the McLaren Group wants that security released so some of its key assets can be used to raise around £280m that it needs in the next few weeks to secure its long term future.

McLaren's arguments in favour of a speedy resolution indicate just how urgent the need is for new financing.

In court documents it states: "Whilst the Group has sufficient liquidity to meet its obligations as and when they fall due in the very short term, further liquidity is required to be made available by no later than 17 July 2020," and that "additional liquidity of approximately £280 million would be sufficient for the Group to be able to support its operations into 2021."

It adds: "This state of affairs is not the fault of the Group. Rather, it has been caused by the COVID-19 pandemic – which has wreaked havoc on the UK economy and threatened the livelihoods of millions of people and the viability of many businesses.

"The Proposed Transactions will enable the Group to access the additional liquidity that is required to ensure that the Group can continue as a going concern into 2021. This will provide a significant benefit to the creditors of the Group (by preventing a cash flow crisis and a value destructive insolvency)."

McLaren's proposed transactions to prevent cash flow problems include McLaren selling its properties and leasing them back from the new owners, and selling "certain of" its heritage cars to an outsider.

An alternative proposal for the heritage cars is to sell them to a newly created subsidiary within the McLaren Group, which would then be able to obtain an asset-backed loan from a third party.

Read Also:

However thus far the existing security on the properties and cars has not been released, and McLaren has not been able to proceed with its plans.

In an attempt to have it released, McLaren Holdings filed a claim in the UK Hight Court on June 8 against UK Bank Trustees Ltd, which is described in court documents as a "Security Agent under the Group's existing financing arrangements (…) as trustee for various financial creditors of the Group."

McLaren's claim is that the security has to be released under certain circumstances, and that the company is "responsible for certifying whether the prescribed circumstances exist".

McLaren further explains that an "ad hoc group of creditors (including hedge funds and distressed debt investors) holding a beneficial interest in two series of notes issued by the Group (the "Ad Hoc Noteholders") have claimed that it would be unlawful for the Security Agent to release the Transaction Security.

"Indeed, they have recently threatened to sue the Security Agent for breach of duty if the release sought by the Company is granted. This threat has placed the Security Agent in an invidious position and has jeopardised the Company's urgent efforts to raise new money."

McLaren says that those noteholders have rejected the proposed transactions, and want to pursue their own, and "are seeking to create a situation in which the Group has no choice but to accept their alternative financing proposal (on terms dictated by them), regardless of the impact on the Group's other creditors and its stakeholders."

Timing is crucial, and McLaren is concerned that a long and drawn-out trial which would take a significant amount of time to resolve.

"The tactics of the Ad Hoc Noteholders therefore appear to be designed to create a situation in which the Group runs out of time and is forced to abandon the Proposed Transactions," it added.

In a remote hearing held last Friday, Judge Anthony Mann noted that the timing was "ambitious" but agreed that a speedy resolution was essential, with a trial starting on July 2.

shares
comments
F1 to roll out new real-time TV graphics in 2020

Previous article

F1 to roll out new real-time TV graphics in 2020

Next article

Ricciardo wants to be pushed by "little ankle biter" teammates

Ricciardo wants to be pushed by "little ankle biter" teammates
Load comments
US Grand Prix Driver Ratings Prime

US Grand Prix Driver Ratings

On a baking hot afternoon in Texas, Formula 1 drivers were tested to their limits. As the pressure on the title contending squads reaches an ever-greater level of intensity, the foremost challengers again showed their class, but were outshone by a standout drive from the upper midfield

The 10 greatest drives of lost legend Jo Siffert Prime

The 10 greatest drives of lost legend Jo Siffert

It's 50 years since Jo Siffert was killed in his prime at Brands Hatch. The Swiss scored just two world championship wins in a Formula 1 career spent largely with privateer teams, but showed on numerous occasions in single-seaters and in sportscars with Porsche that he could beat any of the best drivers of his era given the right equipment.

Why a misunderstood Kimi Raikkonen will thrive in retirement Prime

Why a misunderstood Kimi Raikkonen will thrive in retirement

Three years on from Kimi Raikkonen's last Grand Prix victory at Austin, he is now six races away from ending the longest Formula 1 career in history. His friend and former Ice1 Racing rally team PR man Anthony Peacock explains why there’s nobody quite like the 2007 world champion and why F1 will miss him (but he won’t miss it).

How Verstappen has become F1 champion material Prime

How Verstappen has become F1 champion material

As Red Bull and Honda go all-out for victory in the Japanese engine manufacturer’s last season of its latest Formula 1 dalliance, Max Verstappen finds himself thrust into a compelling title fight with Lewis Hamilton. He told OLEG KARPOV about his evolution into a world championship contender and why Red Bull's no compromise ethos suits him down to the ground

Formula 1
Oct 23, 2021
Why long-run times should please Red Bull in Austin F1 battle Prime

Why long-run times should please Red Bull in Austin F1 battle

Mercedes has been on a roll of late in the ultra-tight fight to win the 2021 Formula 1 world championship. It started off well in practice at Austin for this weekend’s US Grand Prix, but Red Bull got closer as Friday unfolded and even seemed to find an edge in one critical area of what seems set to be set to be another close contest.

Formula 1
Oct 23, 2021
The six critical factors that could hand F1 2021 glory to Hamilton or Verstappen Prime

The six critical factors that could hand F1 2021 glory to Hamilton or Verstappen

The 2021 Formula 1 title battle is finely poised with six races remaining, as just six points separate championship leader Max Verstappen from seven-time champion Lewis Hamilton. In such a closely-fought season, the outcome could hinge on several small factors playing the way of Red Bull or Mercedes

Formula 1
Oct 22, 2021
Can Whitmarsh appointment help Aston succeed where its F1 rivals failed? Prime

Can Whitmarsh appointment help Aston succeed where its F1 rivals failed?

Aston Martin owner Lawrence Stroll is determined to make the group a billion-dollar business. MARK GALLAGHER analyses his latest play – bringing former McLaren team principal Martin Whitmarsh into the fold

Formula 1
Oct 22, 2021
Remembering Switzerland’s first F1 winner Prime

Remembering Switzerland’s first F1 winner

Stepping up to F1 in 1962, Jo Siffert shone with Rob Walker Racing Team and BRM before his career was abruptly ended in a fatal crash at Brands Hatch in 1971. Kevin Turner looks back at the life of Switzerland's first F1 winner on the 50th anniversary of his death

Formula 1
Oct 21, 2021