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Group Lotus sheds light on £30m loan and ‘reshaped’ F1 deal
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Posted By: James Allen  |  11 Apr 2012   |  8:05 pm GMT  |  47 comments

Group Lotus has moved to deny suggestions that it has ended its formal involvement in Formula 1, the sportscar firm revealing details of a “reshaped” arrangement with the Lotus F1 Team that has seen its owner Proton give the Enstone outfit a £30m loan.

In an astonishingly strongly-worded statement issued by the British-based manufacturer this evening hitting back at what it claims have been “mistruths” concerning both its F1 involvement going forward and the wider situation at the company, Group Lotus sought to clarify its relationship with Lotus F1 and Genii Capital following Gerard Lopez’s comments at the end of last week which revealed the sponsorship deal the two parties signed at the end of 2010 had been terminated along with the option for the car company to buy into the team.

Reproducing a mocked-up image that had earlier been published on the internet of its CEO Dany Bahar as ‘Comical Ali’ – the former Iraqi information minister whose eternally optimistic daily press briefings during the 2003 Iraq war made him a figure of fun around the world – to highlight the kind of coverage it was referring to, Group Lotus tackled the issue of its association with Lopez’s team under the heading “false rumour #4: Group Lotus is no longer involved in F1”.

The car company insisted that rather than having parted ways with the team that carries its name, the two parties had agreed on a revised relationship earlier this year which sees Group Lotus retain branding rights to the team until at least 2017 as well as title partner status. It also shed light on details of a £30m loan it says Proton gave Genii, which has seen the investment company  put up “100% of the team’s assets” as security.

“Group Lotus’ branding and marketing rights and subsequent activities remain unaffected by the new agreement until at least 2017. Alongside continued branding and title partnership status, Group Lotus is also the exclusive master licensee for all Lotus F1 Team merchandise,” the Group Lotus statement read.

“The new agreement was reached following Group Lotus owners Proton providing team owners Genii with a £30m loan which is repayable within three years. In order to secure the loan Genii used 100% of the F1 team’s assets as collateral meaning that under the conditions of the loan agreement Proton have been given full title guarantee to all plant, machinery, show cars, computers, office and the Lotus F1 Team headquarters.”

Group Lotus added that Proton indeed retained “rights to purchase 10% of the F1 team”, while a further 10% share would be activated if the team defaulted on its loan obligations.

The takeover of underperforming Proton by Malaysian conglomerate DRB-Hicom earlier this year had prompted speculation over what the future held for Group Lotus and while the car company’s statement admitted it “is going through a very difficult phase at the moment” it added that, amid an ongoing due diligence process by the new owner, there “continue to be positive discussions between Group Lotus senior management and senior management at DRB-HICOM” over the firm’s future.

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47 Comments
  1. Iwan says:

    Quite clearly they’ve had it with all the rumors, but that release of them reeks of amateur hour and panic at the disco.

    I can’t believe any CEO or PR manager can okay that.

    1. Norman C says:

      Oh come on, Ferrari does the same thing all the time with the “HORSE WISPERER’ making personal attacks and defences.

      Maybe Lotus should have the “DESERT FLOWER” to address these one on one issues. :)

  2. Kevin McCaughey says:

    Can you give link to the source please?

  3. Andy says:

    So really there is no change in anything until 2017?

    Does Tony Fernandes still own the Team Lotus name?

    1. James Allen says:

      No that was part of the settlement

    2. Kay says:

      You do realise Tony’s operation has been rebranded to Caterham, ya?

      Though that’s not entirely your fault, their ongoing dispute over the Lotus name does confuse everybody, including themselves I’d say.

  4. moose says:

    sigh.. I think are trying to blame Caterham for everything. but I can tell you there is nothing wrong with the tweet from Tony Fernandes like they had pointed out.
    Tony tweeted:
    So the story is coming full circle. The 2 guys who wasted so much money taking us to court are gone. Chairman and ceo. Could have been so different. But caterham doing good

    They guys that he meant was PROTON’s CHAIRMAN(Mohd Nadzmi Salleh) and CEO(Syed Zainal). The Chairman was forced to resign by the new management(part of the takeover deal). Then, the CEO was reported by The Edge Financial Daily to be resigning from his current post. and the statement by PROTON did not deny it either.
    I’m saying this from Malaysian perspective. General Election is near.The gov is trying to wash their hands off right now. Group Lotus wasting Public’s money is bad for their image. DRB-Hicom, a Gov linked company might do a favor and sell the loss making Lotus and shuts opposition mouths.

    1. Chris Chong says:

      I doubt this has anything to do with the general elections. In fact, the man on the street is unlikely to be aware of or understand the ramifications of Proton being sold to DRB-Hicom.

      If the government really wanted to appease the voters, they’d sell Proton off to VW instead and remove the excessive taxes on foreign cars – a policy that’s meant to protect Proton.

      For the benefit of non-Malaysians reading this, car prices in Malaysia are one of the highest in the world, especially when linked with per-capita income. All non-Malaysian cars are sold with a ridiculous amount of tax, and our average per-capita income is about a quarter or less than that of the UK.

      To put it into perspective, imagine buying a Honda Jazz/Fit for the price of a BMW 3 series when you’re only earning a quarter of your current salary in the UK.

      And the best part of it all is that Protons are actually CHEAPER in the UK than they are in Malaysia so we’re essentially subsidising Protons for buyers in the UK.

      While the sale of Lotus would be a step in the right direction, most Malaysians would rather see Proton disappear from the face of the planet.

  5. Andy says:

    So how does this tie in with the Gerard Lopez story posted on 6th April?
    Lopez is quoted as saying Group Lotus no longer have any rights to buy which is contradicted above. This is even stranger when you consider that Proton have loaned them £30 million, with then entire team given as collateral.
    So we have Genii, Lotus Racing, Group Lotus and Proton, none of which seem to done themselves any favours recently.
    At least the F1 has improved, but their business professionalism seems to have gone off track.

    1. DMyers says:

      That’s what I want to know. There seems to be nothing but a stream of misinformation coming out of Lotus HQ (and I’m talking about the car company, not the Renault team), and it seems to coincide with the tenure of Bahar. Not sure if that’s anything more than a coincidence. But trying to deflect attention by whining on about TF and Caterham isn’t going to do them any good or sell them any cars.

      However, if the F1 has improved it is only because they named a team (Renault) rather than (re-)building one (now Caterham). However, Renault (I can’t bear to call them ‘Lotus’, since they’re anything but) have scored less points than last year, so it’s not really a sign of improvement.

      1. Landon says:

        Tony should have won the rights to the name; as originally intended. He’s far more in the garagiste spirit than the abomination lurching around the pits like the undead.

        I’m sure Chapman’s spinning in his grave so fast they could use him as a flywheel KERS.

  6. Youngslinger says:

    Having just read the full press release, it seemed to refute all rumours, hints and suggestions, in my opinion, in a very personal and unprofessional manner, until the last paragraph which left me with the impression that all before was waffle and Group Lotus’ future is very uncertain. I really hope that they will survive the next few months.

  7. Spyros says:

    Ouch… normally, I’m only reading this page and Autosport for F1 news, but I tried a few other names on-line, taking suggestions from this story, and well… it seems the knives are out in a few places!

    Perhaps everyone ought to calm down a bit…

  8. franed says:

    Seems to be a communication problem between GL and Genii, since what Gerard Lopez said earlier seems to be directly contradicted by this statement. Lopez also said that Genii had been financing the team, would he forget a £30m loan?

    So what if the new owners decide that the loan is not viable? Will they lay claim to the Lotus F1 team? When you are in something over £150 million in debt, giving a loan of £30 to an F1 team seems a bit unorthodox

  9. Terry Pearson says:

    Glad I was paying attention!

    As if to further prove what a complicated sport this is, at least there’s a race this weekend!

  10. Keith says:

    We need to take a step back here and readjust what is going on. The Malaysian Government sold their shares in Proton, which was only 43% of the company. That still left 57% of the shares with other owners. In my book, you own a company if you own more than 60 to 70% of the equity in it. They, DRB-HiCom can still be out voted on a number of issues, but yes they only need a few of the other shareholders to vote with them to pass whatever rule – deal on behalf of the company. In the UK, it is always assumed that the Murdoch Family are the owners of BSkyB, but in fact they only own via News International (which they don’t own outright either) 39% of BSkyB.

    The Black & Gold colour scheme and the Lotus name are from the glory days of Lotus, which everyone who knows the name associates with the team. This was purely a Branding deal, as Genii aren’t a global brand that anyone knows anything about, so would be extremely hard to bring in Sponsors. In the UK, we had a radio station called Virgin Radio; it then changed its name. So why did it do that, well, Richard Branson’s Virgin at one time, in the very beginning had a small holding in it. It was sold off, but the name stayed. It came out in the Financial press that the owners after 10 years, the contract came up for renewal, and it spelled out that Virgin was charging £10M a year for that company to use their name – Brand. It felt that was too much, so dropped the Virgin name.

    As for an option to acquire a share in the F1 team, that is a smart move by Proton. The reason is on two fronts. One, if the team move up the grid, then there value increases, and so does the income they make from the points scored. It also means that there “rate card” which is how they sell space on the car increases in line with their grid position. You are locked in at a preset price, which is your option. If on the other hand the team does crap, then Proton has a way in to stop the rot of the Lotus Brand, which does have a value, and take over the team. Of course they would have had to pay something for this “option”. The detail in the option would kick in if there is a major change in the ownership of Proton, and of course there is now.
    So to protect and keep in place there deal, they, Proton have loaned the F1 team a sum of money, not sure how they will be able to repay the loan in 3 years, unless they sell a percentage of the team to someone, and again if they fail to replay, they take over the team. Looking at the deal, it is pure debt financing. Assets current value around $44M, loan for 3 years at $30M. Over the 3 years the asset values would drop given their age and value, so you come out even.

    The owners of Genii have been a little economical with their spin on the deal, which isn’t really the case. As they have a new $30M loan which came in Feb 2012, so one now wonders how much have they put in cash wise to the team? Remember the team would have got a good slice of money from Bernie for where they have finished over the years. Plus they signed a new sponsor, but not sure for how much. The other sponsors are not new to F1, which they claim they are…., nice spin on their part.

    1. Keith says:

      I should add that DRB – Hicom has gone to the open market and acquire 7.7% more equity (Shares) in Proton. Therefore unless there are changes to the class of shares in the stock (Equity) they hold, then they have 51% of the company. In some countries that means control. Branson owns 51% of Virgin Atlantic, with 49% owned by Singapore Airlines, and it seems everything works OK.

      Maybe James can shed some light on what the terms – cost of the original option that Proton had on the F1 Team. In the amount of money they paid for that option. It was an option to acquire 50% of the F1 Race team. Now Proton has a 100% cover – loan note over the team, for $30M. The security – charge was registered in Feb 2012, at Companies House, but the press release talks about 2017, been the title sponsorship deal.

      My take on this is Group Lotus did a licensing deal on the Lotus Brand – historic colours of the gory years under the JPS Lotus. And that the race team would be called Lotus – Renault (Been the engine supplier) There may be an element of Group Lotus helping out in sourcing sponsors for the race team, for a fee of course. After all Group Lotus (Car side) was looking at building up the brand with a range of new products (Cars) they had taken onboard a number of talented people and it appears had agreements from their parent company to spend a sum of money. With their parent company been an actual car company, they in turn should have known how long and what it would cost to bring to the market new models and an updated image and position of the car group in the world market. (If not, then they shouldn’t have been in that job of approval)
      The current CEO of Group Lotus (Cars) sits on the board of the Race team. I would think to protect the value of the Lotus name. In return if Genii are smart, then they would tap into his knowledge, after all he worked for Ferrari and Red Bull in building their brand awareness. Both of these companies have good things to say about him.

    2. SteveH says:

      Wow, in MY book if you own 51% (well, really 50% + anything) of the shares you control the company. Interesting book, but a bit different than the one I read. By the way, what is the FOM payment for finishing in 4th place?

      1. Keith says:

        SteveH,
        Not so much that if you finish 4th you get X amount. It is as usual in F1 a lot more complex than a simple amount. They look at your position over the last few years; in the case of Williams this has helped them out a lot. You get appearance monies from the Race sponsor at each track you go to, plus the prize money, depending on where you finish in that race. This can be split with the driver, depending on his contract. Also your sponsors will be on a base deal, and the higher up you finish in a race or at year, means the Sponsor tops up the amount they pay. If you win a race then the sponsors gets a huge – many millions worth of free exposure to the world media – market, so they factor that in to their package.

        In some countries, you can have 30% of the equity, but carry voting rights – been different class of share – that each share is worth 2 votes; therefore you have votes for 60% of the company.
        Early on all the talk was about the DRB-Hicom acquiring the Malaysian governments’ shares, but that was only 43% of the company not control. Later they went to the open market and picked up what they need to control the company which is why after double checking the share register I saw they had bough new shares on the open market, so adjusted what I posted before.

  11. [MISTER] says:

    To be honest, in my uninformed opinion, all this is kinda confusing now and I feel that this ex-Renault F1 team is beingpushed and dragged into this saga way too much.

    Hope everybody in the team can keep its head focused on their car and racing and don’t mind these businessmen who it looks that all they want is to drag their names into the news headlines.

  12. Chee says:

    More cash from the Malaysia’s tax payers, but surely it will run dry at some point.

  13. Ry says:

    Reading the press release – Remember when Kevin Keegan had that melt down at Alex Ferguson?

    Just saying……..

  14. daphne says:

    They need to hire a better press-release writer, and proof their releases for offensive content in the future – it is more of a foolishly worded rant than a press release “setting the facts straight”. They are possibly crossing swords with a lot of people with this kind of thing – the comments about Mike Gascoyne were totally unnecessary.

    1. AuraF1 says:

      I’d lay a bet that rant was dictated by Dany to an appalled PR assistant. There is no PR department in the world that would expect to keep their jobs by issuing such a bizarre rant with it’s hilariously wounded tone unless senior management had demanded it be said.

      The F1 team now branded lotus f1 team are a top quality bunch of guys and girls. The various parent organizations using them as an ego fueled battle for big money are not. Sadly if things go wrong it’s the f1 team that will suffer.

  15. Jeff says:

    Wow, in return for all the assets of the team, naming rights until 2017, Genii got a 30 million pound loan. I’m glad Genii did negotiate on my behalf for anything. What a dud deal. Effectively a sponsorship that you have to payback.

    We don’t know the whole story here and it seems Lotus F1 has been screwed. This is what happens when business men and not racers run racing teams to get a higher profile.

    1. Brisbane Bill says:

      I think the objective here was to keep a high profile brand name on the car to attrack other sponsors. With Renault now gone from ownership and if the Lotus name were to go, the team would have to rename itself and that carries huge financial consequences for getting a share of the F1 money pot. The $30M loan helps plug an immediate hole in the team’s accounts and buys them time to trade at a premium (Lotus brand being higher value than Genii brand in racing circles) to attract sponsors to fill the hole.

      Whilst I was of the same initial opinion (i.e. “Wow, wouldn’t want Lopez negotiating any of my deals”) on balance it probably turns out to be a sensible move in the circumstances.

  16. TG says:

    I reckon if Genii defaulted, Proton would immediately sell the F1 team and its assets to someone else rather than plow money in to continue putting Group Lotus on the grid. They’re just way too conservative.

    So, basically, this team will probably end up being called Renault again in its not too distant future, and the last few years would have been a massive waste of time and money for all involved!

    This’ll happen once the French engine supplier wants to start leveraging off its dominance.
    And it’ll certainly want to do that if VW get involved. Obviously the “smart money” is always on remaining just an engine supplier rather than running an entire team, but it just takes one manufacturer, like Merc, to roll the dice, for others to consider doing the same.

    1. Brisbane Bill says:

      And for a bit of political pressure to be applied if the French GP returns to the calendar.

  17. Chris says:

    I want to take a banner to all the GPs reading

    ” WHERE ARE YOUR 40 POINTS GASCOYNE!!!”

    [mod]

  18. shane says:

    This is gonna end up in another courtroom.

    1. DMyers says:

      “Come and enter the delusion with us.” Hahahahaha!

  19. kfzmeister says:

    This is just too much. Bunch of egos running amok!

  20. Rick Curzon says:

    Let’s not forget the acronym:
    Lots Of Trouble, Usually Serious!

  21. Kay says:

    This Lotus-brand thing is getting more and more confusing and tiring now. Can someone please step in to end this all for good by buying the team outright?

    Maybe David Richards can take an interest in the team and rebrand the whole thing to Prodrive so there’ll be no more fights over “Lotus”.

  22. Adrian Newey Jnr says:

    Personally I think this is a sad distraction from the sterling job being done by the team at Enstone.

  23. forzaminadi says:

    Absolutely ridiculous and an embarrassment for all involved. I bet a few Lotus PR people are waking up and cringing this morning.

  24. Allan says:

    This whole thing although not a surprise shows that Genii have been pulling the wool over a lot of peoples eyes.
    There were rumours last year they where running out of money but Genii kept saying they would cover the losses, yes by getting a loan from Proton.
    Lotus or Renault are doing a great job this season and should be frontrunners but is shows that the guys at the top don’t have a clue and are giving the team a bad name.
    I think more will be heard on this matter over this weekend, but not good for F1.

  25. Dave says:

    Dear oh dear. Lotus getting a bit too big for their boots. At least Caterham designed and built their team and their cars. ‘Lotus’ Renault is just a Renault with a Lotus badge on the side.

    Renault are fighting with Mercedes and Ferrari – not Lotus.

    Lotus are fighting with Santander and Vodafone for best sponsorship decals.

  26. Mike Dawson says:

    Owning 51% of a company and assuming you own a controlling stake is a common misconception. While it might be seen as a majority share it doesn’t always follow that a 51% owner has control an indeed ownership of a business.

    On the press release:

    I read it on Autosport, at the time I thought Autosport had lost the plot and taken on a work experience kid to bitch about Lotus. Only on a second read and finding the press release in another site did I see that Lotus clearly have some serious issues with thier PR dept.

  27. gonzeche says:

    Having followed all the matter, the only thing clear to me now is that I don’t like Lotus or anyone involved in all of this. Well done, people!

  28. Paul says:

    Is this the team that raced with “Lada” branding a year or two ago? Lada F1….

  29. james66 says:

    The paranoid, defensive rants coming out of the Hethel PR department are par for the course – during the Group Lotus/Team Lotus confrontations they released a succession of information which later proved to be untrue, which makes it difficult for any thinking person to believe it now. It sounds like “they protesteth too much”. The fact is that millions of dollars have been borrowed and loans must be repaid, but I understand that over the first twelve weeks of 2012 only 35 cars have been sold (less than three a week). How many staff are there at Hethel and how will they continue to be paid if performance continues in this way? There are grandiose plans to launch a new model range but it will be a miracle if Group Lotus get that far. The F1 team deserve to do well but to call it ‘Group Lotus’ is a fantasy – it’s actually Renault, with the Lotus name painted on the side. As far as I know Lotus Cars haven’t contributed anything technically to the design, but in their imagination (and literature) they claim to be involved in F1! The reality is that they’ve had the same technical input as another of the F1 car’s other sponsor, “CLEAR Anti Dandruff”! It’s now time to clear out the current senior management from Hethel and start again with people who actually understand how to make a recovery plan.

  30. David Ryan says:

    I think it’s fair to say anyy sympathy I had left for Group Lotus’ difficulties just went down the plug hole. Irrespective of the accuracy or otherwise of the speculation, responding in such a manner is deeply unprofessional and in my view pretty disgraceful. Were I a sponsor of Lotus’ various motorsport efforts I think I would be making great efforts to distance myself from this PR gaffe.

  31. Ben G says:

    Very funny. I wish other teams PR people put out statements like this.

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