A fuller version of the story behind the failed bid to turn Donington Park into a Formula One venue has been revealed courtesy of the administrators winding up its former leaseholders’ company.
In their report, filed on January 11 and available via the Companies House website, administrators Begbies Traynor shine a spotlight on the events that led Donington Ventures Leisure Ltd to bid for the British Grand Prix contract, only to see a series of funding plans fall through as it fought to secure its increasingly shaky finances.
A great deal of the story was, of course, in the public domain already but much of the report’s detail concerns matters that were not nearly as widely-known.
The administrators explain how the company directors signed a 150-year lease on the circuit on January 31 2007 with the aim of bringing F1 there. But DVLL did not have a good first year of trading, with the company sustaining losses estimated to be around £12.3 million, including lease-related payments to the Wheatcroft family.
Their report says that, unable to support similar losses for a second year of trading, the directors decided to press ahead with the F1 scheme as the best solution to their financial problems. Having secured the race contract, and committed themselves to funding improvements, the next task was to tie down that funding.
The administrators confirm that the initial plan had been to raise the money through a widely-publicised third-party debenture scheme promoted by sports funding specialists ISG that would have provided sufficient capital plus a margin for cost overruns.
This funding plan was the basis on which the contract with Formula One Management was signed.
Once the deal to stage the race was in place, the report states that the company suffered “significant costs” as it went through the process of gaining planning permission, which was finally achieved in January 2009. Contracts were put out to tender and a wide selection of architects and consultants retained.
Although not mentioned in the report, this is the time at which DVLL also filed the last set of its accounts to be made public – those for 2007. This led to widespread press and public interest in the apparently rickety state of its finances as the accounts showed debts worth £67 million and losses of £12.7 million.
In response, DVLL’s Simon Gillett issued a statement via the Press Association refuting the figures and saying: “Our 2008 financial report has not been filed with Companies House, which leaves me confused as to where certain publications have sourced their facts and figures from.” He also claimed the debt was “an accounting treatment of a 150-year lease being depreciated into capital asset”.
However, more pressing problems intervened. In March 2009 the scheme’s financial backer, believed to be investment bank Goldman Sachs, withdrew the offer of funds “to shore up its own balance sheet”. The administrator’s report shows that DVLL directors received a letter from the debenture promoters informing them of this development on March 4.
The directors immediately started to seek alternative finance, and thought they had found it in the form of “a wealthy Dubai-based property developer” who would need to liquidate a proportion of his portfolio in order to fund the project. But, after what is described as two and a half months of due diligence, it became clear that a crash in the Dubai property market meant the portfolio could not fetch enough money to pay for the project.
It was now May and the directors needed to locate a new source of finance to pay for the redevelopment and to keep their company operational. They turned next to Citigroup and a bond issue. In order to be successful the bond had to raise £120 million and the directors had to raise a further £25 million of equity.
Citigroup is said to have been “confident of a successful issue” in an improving market and, in anticipation of this, contractors were appointed in August to start work on the site, beginning with groundwork and pre-construction work. This was paid for with a £1.4 million cash injection from one of the directors but, in the event, the October issue failed to attract the necessary level of interest.
As this was going on the directors also faced what is described as “creditor pressure… building against the company”, with payment demands regularly arriving and some creditors starting legal action. Money was owed to Formula One Management, with deadlines extended several times, and funding was urgently needed in order to prevent the loss of the F1 contract. At this point Silverstone Circuit made it clear it had recommenced negotiations with Formula One Management to step in and take over the British Grand Prix contract.
The administrators’ report says the directors were now still pursuing alternative sources of funding and felt good progress was being made, but were concerned a creditor might take action that would cut their feet from under them.
Rent arrears, which had already led them to the brink of legal action in April 2009, were becoming an issue again. This is the reason given for the company filing a notice of intention to appoint administrators on October 22 last year.
They hoped to use the brief breathing space this won them to secure finance to save the F1 contract and pay other creditors. Negotiations with a potential funder were reportedly far enough advanced for a second notice of intention to be lodged on November 5 but three almost simultaneous setbacks definitively ended the company’s prospects.
On October 29 Formula One Management terminated the British Grand Prix contract. On November 13 the Wheatcroft family recommenced legal action over unpaid rent, less than two weeks after the death of family head Tom Wheatcroft from cancer. And on November 15 the last remaining hope of securing funding was lost after the DVLL management received an email notifying them that the potential investor would be withdrawing.
With all possible avenues of finance exhausted and the Formula One plans in tatters, DVLL’s tenure at Donington Park ended on November 17 as administrators Begbies Traynor were appointed.
No buyer for the lease could be found and it reverted to the Wheatcroft family, who are now actively searching for a new tenant – and who also face an approximate repair bill of £600,000 to reinstate it to a condition where racing will be possible again.