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McLaren goes to court to secure ‘urgent’ refinancing

The British supercar brand is struggling with cash flow

Too many new models may be hurting the business. PHOTO FROM MCLAREN

Supercar maker and Formula 1 team owner McLaren seems to be in a really tight spot as far as its finances are concerned. That is according to a report by the BBC, which suggests that the company is taking legal action to secure what is being called urgent refinancing due to it facing “severe and unexpected financial difficulty.” The firm is saying that the pandemic has led to an “impending liquidity shortfall” that requires it to raise cash no later than July 17 if it wants to keep the lights on. To do so, it needs to come to an agreement with an existing group of creditors, who are objecting to the way the organization plans to secure this new financial lifeline.

McLaren is looking to use its factory and historic car collection as security, but a group of investors is claiming that these assets were already used as collateral in an earlier bond issue that raised more than £650 million (P40.49 billion) in 2017. The court documents also show that an earlier £130-million (P8.08-billion) credit agreement has already been used up, and that shareholders even pumped an additional £291 million (P18.08 billion) into the business in March this year. In total, shareholders have handed over £500 million (P31.08 billion) in the last 18 months alone, but more cash is now desperately needed to stave off the effects that the global health crisis has had on the business.

Are we seeing the tail end of McLaren’s existence? PHOTO FROM MCLAREN

The terrible virus has hit McLaren hard: The F1 season is suspended, sponsorship deals are on ice, and car dealerships are closed. Even the opening of the McLaren Manila showroom has been delayed. The British car brand has already announced plans to cut 1,200 jobs, and is saying that the £280-million (P17.4-billion) it is looking to raise will help support operations until next year. Majority-owned by the Bahraini royal family through its Mumtalakat sovereign wealth fund, McLaren likes to present itself as a purveyor of desirable high-end cars designed to appeal to super-rich petrolheads, but reality is now painting a slightly different picture. The used-car market in its home country of the United Kingdom, for one, has recently seen a number of McLarens changing hands for amounts way lower than one would expect.

Constant model updates and more and more versions to choose from have turned McLaren into something like the Apple of the supercar world

Most notably, eyebrows were raised when hardly used 540C and 720S models sold at auction for less than half their original sticker prices not too long ago, indicating that the market isn’t overly keen on cars from Woking right now. This might at least partially be of McLaren’s own making. Constant model updates and more and more versions to choose from have turned the firm into something like the Apple of the supercar world. Instead of previously built cars increasing in value—something regularly achieved by Ferrari and Lamborghini—pre-owned McLarens are now getting cheaper by the day, which in turn discourages potential buyers from purchasing brand-new ones.

Just what is in store for McLaren in the near future? PHOTO FROM MCLAREN

High-end models like the Senna are still bringing in the cash, but the bread-and-butter versions may become an additional headache next to the coronavirus impact, and it will be interesting to see how McLaren reacts to the challenges it is currently facing. There is no doubt the company will still be around in the future, but we may also see changes in the ownership structure, with rumors flying around that a stake in its prestigious F1 team could also be up for grabs right now. If you have a couple of hundred spare millions in your pocket, now might be a good time to buy yourself a piece of this automotive brand.

Frank Schuengel

Frank is a German e-commerce executive who loves his wife, a Filipina, so much he decided to base himself in Manila. He has interesting thoughts on Philippine motoring.