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Battle between past and present Caterham owners turns toxic - F1 team in crossfire

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Battle between past and present Caterham owners turns toxic - F1 team in crossfire
Oct 23, 2014, 9:43 PM

Today saw F1's "battle of the press releases", with the old owners of Caterham (Tony Fernandes and Caterham Group) and the new owners (Engavest SA)...

Today saw F1's "battle of the press releases", with the old owners of Caterham (Tony Fernandes and Caterham Group) and the new owners (Engavest SA), slinging mud at each other over who owns what and who's responsible for the current mess over Caterham Sport going into administration with debts of £12-15 million.

Engavest argues that it has paid money to Fernandes and he has failed to transfer ownership of shares to it, while Fernandes says he's withheld the shares because they haven't paid anything. He says the team may "cease to race" as a result, while Engavest says that the team and its problems are Fernandes' to deal with, as he hasn't transferred it to them. Engavest appears to have washed its hands of the team, while Fernandes and his team say that Engavest is "walking away from it's liabilities" and probably never intended to take the team over as a long term proposition anyway.

The day started with the administrator locking the staff out of the Leafield factory and refusing to release the cars to travel to Austin on this weekend's freight plane departure. A no-show at Austin next week would put them in breach of their commitments to F1 Group.

Caterham Russian GP 2014

Then came a series of statements, with this one from Tony Fernandes and Graham Macdonald of Caterham Group, which contains the threat that the team may soon "cease to race"

“In June 2014, I decided, together with my co-shareholders, to sell my stake in the Caterham F1 team. 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.”

Graham Macdonald, Caterham Group CEO:

“We genuinely believed, at the time, that the sale of the team was the best route for the staff and creditors of the Company, as we felt it secured its long term future. The whole agreement with Engavest was based around a low consideration for the business, with easy payment terms so that creditors and staff could be paid. The buyers were made fully aware at the time of all outstanding liabilities. However, it appears to me that they never had any intention of paying these liabilities. I go on to question how anyone who was interested in the long term future of the business would appoint one of their cleaners – Constantin Cojocar – as the sole director and shareholder of the UK operating Company?”

“We continue to see claims and counter claims from the F1 team which are totally unfounded. Not only have they failed to pay the creditors (and have even left our shareholders to pay some of the creditors on their behalf), but they have failed to pay us anything for the use of our factory and site, or anything for the use of our brand name. In short the new owners have paid us nothing and now the administrators have been appointed they want to walk away from their liabilities.”

Speaking in a video interview with Sky Sports, Macdonald alleged that that the staff at Leafield, who had been moved out of Caterham Sports into a new company CF1, had been informed by email that they were being moved back into Caterham Sports, the company in receivership. If that is the case, he said, the future "looks bleak".

Caterham, Ravetto

Later this evening Engavest issued a rebuttal which ended with a very strong statement:

Engavest SA, strongly refutes the allegations of Tony Fernandes and Caterham Group CEO Graham Macdonald regarding its conduct while trying to purchase Caterham F1. Our statement of earlier today still stands.

Every single condition precedent of the Sales and Purchase Agreement for which Engavest was responsible has been met.

Only the seller, which includes Mr Fernandes, failed to meet his obligations.

All salaries have been paid.

Engavest sold CSL. It did not appoint Mr Cojocar who, we believe, was a former top footballer for Steaua Bucarest during the 1980s.

The claims of Mr Fernandes and Mr Macdonald contradict their own press statement dated 03 October 2014

“Caterham Group wishes to clarify that, following the sale of the F1 business in July, it has no affiliation with Caterham F1 Team”.

That one sentence alone contains two errors:

1, the date was June 29

2, having failed to transfer the shares Caterham Group and Mr Fernandes wholly owned Caterham F1 at the time of the statement, as they do today.

Incidents such as a Caterham Group representative forcibly breaking into a filing cabinet containing our private and confidential documents and the continued refusal to deal with the outstanding loan of Exim Bank and complete the agreement has culminated in Engavest’s total comtempt of Mr Fernandes and his Group executives with whom we entered a deal in good faith."

Meanwhile the administrator of Caterham Sports, Finbarr O'Connell, said that it is not too late to save the F1 team, as long as a proper financial offer is made,

"We are trying to reach an acceptable arrangement for them to be there (the Leafield factory). We had a meeting yesterday with 1MRT and lawyers and the offer they made was unacceptable. So I've sent them away.

"Hopefully they can come up with an acceptable proposal."

Follow us on Twitter @jamesallenonf1 https://twitter.com/Jamesallenonf1

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