The Marussia F1 Team Join Caterham on the Road to Administration

Company Voluntary Arrangement
The Marussia F1 Team Join Caterham on the Road to Administration
The Marussia Formula 1 team has joined fellow underachievers Caterham Sports after entering into administration. All the latest at Jameson Smith & Co.

Marussia has mirrored the earlier announcement of Oxfordshire based team Caterham to become the second Formula 1 team to enter into administration in less than a week. The Marussia team, based in Banbury, will continue to operate despite putting up to 200 jobs at risk.

Both teams have been given special dispensation by Formula 1 boss Bernie Ecclestone to miss the forthcoming races in the US and Brazil. This leaves a reduced line-up of just 18 cars, making it the smallest field since the 2005 Monaco Grand Prix.

Budget caps encouraged new teams

Both Marussia and Caterham made their first appearance on the grid in 2010 after budget caps were announced by then FIA president Max Mosley in a bid to cut costs and level the playing field.

However, shortly after the announcement, the proposed £40 million budget cap was scrapped, making it increasingly difficult for the new teams to make ends meet. HRT, another team to be lured by the promise of reduced running costs went bust in 2012. Unless Caterham and Marussia can find new buyers, they’re poised to follow suit.

Administrators in the driving seat

Marussia has appointed administrators from FRP Advisory, who have said the team will continue to operate despite not taking part in the forthcoming US Grand Prix. In a statement, FPR Advisory said no redundancies have been made as yet, and all staff will be paid in full until the end of the month.

This was followed by the caveat that: “The ongoing staff position will, however, be dependent on whether the company can secure new investment in the limited time available”.

The situation at Caterham

The Leafield-based manufacturer of the Caterham Formula 1 team cars agreed to hand over the running of the company to administrators on 20 October.

Caterham Sports Limited was left with no option other than to call in the administrators after investment promised by the company’s new owners failed to materialise, leaving Caterham owing millions of pounds to its suppliers.

Financial performance mirrors on-track failure

Formerly known as Lotus Racing, Caterham F1 has yet to win a single point after five years of competition, and currently, sits bottom of the FIA championship.

The poor performances prompted previous owner Tony Fernandes, the AirAsia and Queens Park Rangers FC owner, to sell the franchise to a consortium of investors led by Constantin Cojocar. Despite being listed as the sole director and shareholder of Caterham Sports, the administrators are yet to make contact with Mr Cojocar.

Money promised did not arrive

A statement from the administrators Smith & Williamson LLP said: “Mr Cojocar… indicated in court papers that there was an intention that his associates would provide funding of £2million per week which would be used to pay the company’s creditors, but that, unfortunately, the money promised by his backers did not arrive.

“He has further indicated that due to the non-receipt of these monies he had no choice but to request the court put the company into administration.”

According to the company’s records filed with Company’s House, Caterham Sports posted revenues of £47million for the year ending 31 December 2012, with £12million – £15million owed to suppliers.

The directors may find it difficult to take a back seat in the management of the company as happens with an administration and it will be interesting to see how this situation evolves over the coming weeks and months.

Stay tuned to the Jameson Smith & Co blog for all the latest corporate insolvency news. Alternatively, if you’re struggling to keep your business in the black, get in touch with our experienced team of turnaround practitioners on 08000 746 757.

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