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Re: News and Stuff!
Posted by: Ozzy Osbone
Date: 04/01/2019 15:16
Quote:
IanSmithISA
Good morning,
Quote:
AlanJones

2) You are bringing up these loans often. Any news on when they are or will be repaid? Any indication on the load it bears upon our budget?

That's because they are in my view a very very serious issue for the company:-)

1) It is not only that debt repayments take money out of the current year's budget, they in effect say to a sponsor give us $x million and we will give it to the bank and it will not be used to develop the car.

Interest rates are so low at the moment interest costs seem be about the same as a car having big smash into the barriers.

2) If income drops unexpectedly then covenants that were originally thought of as liveable with suddenly become onerous. If these covenants are violated then debts may become immediately repayable, which of course they can't be.

3) If you already have used up what others would regard as your safe debt capacity, you will not be able to say "lets get a new supercomputer on finance" or "lets borrow a few million to do some original research on CFD, batteries etc".

As mentioned elsewhere the CFD rules have changed for 2019 and now permit unlimited use.

Looking at the actual debt number from the end of year 2017 report

A loan facility of 10,000,000 repayable in eight instalments over a four year term. These instalments are 500,000 on 30 April 2018 and every six months thereafter until 30 April 2021, with all outstanding sums repaid in full on 31 October 2021. This facility carries interest at 2.4% over LIBOR.

A loan facility of 3,144,000 repayable in thirty-one instalments over a three year term. These instalments are interest and capital repayments of 107,000 on 2 January 2018 and then on 31 January 2018 and every month thereafter, with all outstanding sums repaid in full on 30 June 2020.

A revolving credit facility of 10,000,000 to be made available throughout the period ending 31 October 2021.This facility carries interest at 2.4% over LIBOR.

An overdraft facility of 5,000,000. This facility carries interest at 2.4% over the Bank of England Base Rate.


So Williams went into 2018 with just over 20million of debt due in various chunks up to the end of 2021 and a 2017 EBITDA of about 10million.

Ratios of EBITDA to debt of over 4 are considered dangerous, so the 2017 numbers are fine at about 2.

But is also pretty easy to see that only a small drop in income, such as the difference in constructor's prize money from 5th to 10th makes this ratio increase to unacceptable levels. If the internet figures are right the loss in constructors prize money is about 15million.

In the first half of 2018 Williams repaid about 14million wow, but took on another 10million reducing overall debt by 4 million.

This is not new as at the end of the 2014 season loans looked like

A loan facility of 10,000,000 to be repaid in quarterly instalments of 250,000, with the first repayment date falling 3 months after the date of the credit agreement
and the final repayment in September 2018.

A revolving credit facility of 10,000,000 to be made available until September 2018.

An overdraft facility of 5,000,000 to be made available until April 2016.

A term loan facility of 11,000,000 repayable in December 2016.

A term loan facility of 5,000,000 repayable in quarterly instalments of 250,000, with the first repayment date falling 9 months after the date of the
credit agreement and the final repayment due in June 2020.


Remember that the current debts are after the sale of 10million worth of land, over 5million from the sale of rights for the flywheel system to GKN and some reasonable sponsorship and constructor's revenue.

You can see from this that the debt from 2014 is not really being repaid, just put back to a later date.

If 2021 results in a much more equal constructors prize fund then these numbers are manageable. With Red Bull possibly threatening to leave, Merc and Ferrari having a lot to lose I wouldn't bet too much on the new system being as equal as it could be, remembering that Williams will lose their 10million bonus.

So if Williams end up 10th in 2019 then I can seriously see the possibility of interest costs sky-rocking and or the team being forced to sell and lease back their property to repay loans.

This would of course be a forced sale so full market value may not be reached.

These are course all public numbers and will have been gone over far more thoroughly by potential sponsors. Sky might not blink at them, Rich Energy may be more likely to do so.

Bye


Ian

Debt can be re-financed though Ian. The 'repayment date' is kind of not the point. It's what the rate is at that point. I am slightly disturbed to see loans based on LIBOR. Even I can get finance on BOE + rates and I am small fry.

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