McLaren sues creditors as insolvency threatens
More details on McLaren’s financial troubles have surfaced following a lawsuit filed by the automaker and Formula One team against some of its creditors.
McLaren is severly short on cash due to a crash in its revenues caused by the freeze on sales and the delayed start of the 2020 F1 season caused by the Covid-19 coronavirus pandemic.
As a result, there’s talk McLaren is looking to sell a stake in its F1 team. The company also announced in May it would need to shed 25% of its staff, which was about when it was discovered that McLaren was looking to offer its headquarters in Woking, United Kingdom, and some of its classic cars as collateral for loans.
2020 McLaren MCL35 Formula One race car
However, McLaren already used its headquarters and classic cars as collateral for loans it secured in 2017 to buy out former shareholder Ron Dennis and pay for other expenses (Dennis’ shares alone cost McLaren $343 million). Those earlier creditors are now blocking McLaren from using its headquarters and classic cars to secure new loans, and have instead provided an alternative proposal for financing.
McLaren isn’t keen on the alternative financing deal so has taken the earlier creditors to court in an effort to have a judge declare they have to release their hold on the headquarters and classic cars, according to information obtained by Forbes from Mclaren’s lawsuit.
In its lawsuit, McLaren said it required the new funds to ensure it “can continue as a going concern into 2021” and that they would help to prevent a “cash flow crisis and a value destructive insolvency.”
McLaren Production Center in Woking, England
Due to the urgency of the potential insolvency, the parties have proposed to deal with the matter via a two- or three-day trial starting July 2, according to Forbes.
McLaren has been kept running by additional injections from its shareholders, the biggest of which is the Bahrain government. The company also requested an emergency loan from the British government but was knocked back.