F1 gets $2.9bn loan amendment to help weather crisis
Formula 1 has been given financial breathing space until the end of 2021 after Liberty Media amended the conditions attached to a $2.9bn loan – and CEO Chase Carey says that the change will help the company get through the Covid-19 crisis.
The loan and a $500m credit facility that belong to F1 are governed by a covenant in which the lenders specify the maximum possible leverage, or ratio of total debt to profit, that F1 is obliged to operate within.
Usually that number wouldn’t be an issue, as F1’s annual profits have always been sufficient to keep the ratio well below the required limit. However, with 2020 profits set to be badly hit by the Covid-19 crisis, and the fallout likely to spill into 2021, F1 risked being in breach of the covenant.
Liberty has addressed that risk by negotiating an amendment, which specifies that “subject to compliance by F1 with certain additional conditions, the net leverage financial covenant shall not apply until 1 January 2022.”
In other words, the original conditions of the covenant have been put on hold until the end of 2021 to help F1 get through two potentially difficult years.
Carey says that the change will be a big boost to the company: “This new flexibility in our debt covenants, along with a strong balance sheet and ample liquidity, will enable us to weather this difficult time.”
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