Funding activities

McLaren secures future with cash injection

  • McLaren had to lay off a quarter of its workforce, but its risk of bankruptcy now seems to be decreasing thanks to a major investment by a bank in Bahrain.
  • McLaren CEO Mike Flewitt has previously said the hypercar maker could be set back two years in its product momentum as it faces financial challenges, although the 765LT (above) and the Elva are still on the right track.
  • The company had previously attempted to raise funds from a bond issue backed by McLaren’s historic car collection and headquarters.
    Britain’s luxury car makers have been facing an existential crisis for COVID-19[feminine] struck, suspending production and seeing demand for their products plummet around the world. Aston Martin has lost its CEO and announced last week that it would sell more shares as it tries to stay in business. But McLaren seemed to face an even tougher challenge, first laying off 1,200 employees and then engaging in a court battle with existing bondholders who, if lost, could have bankrupted it.

    The legal argument is still ongoing, and it is whether McLaren can take on more debt on assets, including its high-tech factory in Woking, England, and itscollection of historic Formula 1 cars. Holders of a previous bond issued in 2017 say these are already being used as collateral against that previous debt. In documents filed with the English courts, McLaren said a line of credit worth nearly $160 million had been fully drawn and the company would face a potentially catastrophic cash crunch if the ruling goes against it. . The company has been suffering on several fronts since the start of the COVID-19 pandemic, both halting road car production and suspending the start of this year’s Formula 1 season.

    Now, whatever the outcome of the lawsuit, McLaren appears to have secured its short-term future. Over the weekend, McLaren Formula 1 team principal Zak Brown told Germany Auto Motor and Sport that “issues have been resolved. You will hear positive news from us in the coming days.” This morning, the National Bank of Bahrain confirmed that it is offering McLaren a “financing facility” of around $184 million to help it through what it hopes will be the end of the crisis.

    This makes sense since Bahrain’s sovereign wealth fund owns a majority stake in McLaren and also 44% of the bank. McLaren is also set to reap much-needed revenue from the long-delayed start to the Formula 1 season next weekend, and with limited road car production set to resume this week. Insiders say demand for the next 765LT (pictured above) which was announced earlier this year has been strong, particularly in the US, and that the company remains on track to launch the first model to sit on its new platform of second generation next year.

    The COVID crisis has shown how quickly the balance sheets of even seemingly robust automakers can turn blood red, but it looks like McLaren now has at least some respite beyond the outcome of its legal battle.

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