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Formula 1 has gained more than $1billion in liquidity and awarded advance payments to some teams in its bid to secure the championship’s financial health amid the global coronavirus crisis.
The opening nine rounds of the 2020 F1 season have been cancelled or postponed because of the COVID-19 pandemic, harming the three main revenue streams for the championship: race-hosting fees, television broadcasting deals and sponsorship.
Teams will be severely hurt by this as prize money from their share of F1 revenue makes up the bulk of the budgets on the grid, as does sponsorship that will also be affected by the lack of races.
Several emergency measures have been taken to protect the short-term and long-term interests of the teams and the championship, including delaying new technical rules to 2022 and trying to negotiate a significantly reduced budget cap for 2021.
Liberty Media CEO Greg Maffei told investors on Thursday that it has advanced payments for “certain teams”, and is willing to take further action if needed to help teams “remain solvent because we want them to race successfully in 2020, 2021 and beyond”.
In addition, Liberty has announced a redistribution of assets and liabilities between the Formula One Group and Liberty SiriusXM Group that results in more than $1bn in liquidity for F1.
The F1 side of the Liberty business has effectively traded its Live Nation Entertainment stake, part of its share of the Atlanta Braves Major League Baseball organisation, and $1.3bn in liabilities, in return for $1.4bn in cash and a $165m call spread in Live Nation stocks.
“We believe it provides certainty in an uncertain time on the number, timing and nature of races that F1 may be able to achieve,” Maffei told investors.
F1 teams are at risk in the current hiatus, with five UK-based teams resorting to the government’s furlough scheme and putting staff on enforced leave with part of their salaries covered by the state.
Team executives and drivers are taking pay cuts to help manage finances through the crisis, while F1 itself has furloughed around half its staff, with the likes of F1 CEO Chase Carey also taking a reduction in salary.
McLaren has warned that as many as four teams could disappear from the grid if serious action is not taken, and is angling for a $100m budget cap from 2021 to overhaul the competitive landscape and make it worthwhile for investors to continue funding smaller teams.
Meanwhile, Williams has said it is “absolutely critical” racing takes place this year, and the under-pressure team is considered one of the most vulnerable in the current situation.
Maffei said Liberty was not approaching it with an “open chequebook” but could take further action to help.
“We’re not encouraging using our cash in an unwise fashion,” Maffei said when asked about Liberty’s intentions to help teams.
“We’re trying to balance the operating business of F1 and its current results against the operating results of our partners, the teams who do incur large costs.
“We have advanced money, in advance of team payments for certain teams already.
“There are cases where we may do more of that. There are other things we might do to bridge teams that need help.”
