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McLaren scrambles to secure extra capital: report

On the ropes: McLaren is hoping to secure extra capital in quick time to keep its business afloat.

McLaren goes to court to allow urgent refinancing amid economic impact of COVID-19

26 Jun 2020

MCLAREN has leveraged the legal system in an effort to secure an “urgent” round of refinancing, according to a report by British publication Autocar.


The supercar manufacturer has taken legal action against a group of creditors in order to ease financial difficulties brought on by the COVID-19 pandemic, which would allow the brand to raise capital to avoid what it is calling a potential “liquidity shortfall”.


McLaren Holdings Limited, which includes the supercar manufacturer and its Formula One team, has issued a bond for more than £650 million ($A1.17b) against its production facility in Woking, Surrey, which includes a collection of historic racecars.


However investors are claiming that the facility and car collection are already tied up as security from a bond in 2017.


The effects of the COVID-19 pandemic have placed McLaren in a state of “severe and unexpected financial difficulty”, which has caused the judge presiding over the case to expedite the trial, as McLaren has warned that it risks insolvency if not resolved soon.


A two or three-day trial has been proposed by both sides, which is set to begin on July 2.


According to Autocar, the investors have perceived the bond proposal as undermining their existing investment, and as such have proposed an alternative refinancing arrangement.


Court documents filed by McLaren Group said that it has “fully drawn” an earlier credit agreement of £130 million ($A234.5m) and that the brand’s shareholders had invested a further £291m ($A524.9m) in March, which formed part of a £500m ($A901.9m) investment over the past 18 months.


The financial hardship has already taken its toll on McLaren, with the company forced to lay off 1200 staff last month, representing over one quarter of its workforce.


Sackings were spread across its F1, car manufacturing and applied-technologies operations, with a range of factors to blame for the economic shortfalls.


The cancellation of F1 events have led to greatly reduced sponsorship income, with the program accounting for 12 per cent of the company’s revenue.


Suspension of its car-making operations and reduced sales have also wreaked financial havoc, with McLaren Group chairman Paul Walsh saying the layoffs were a last resort for the company.


“It is a course of action we have worked hard to avoid, having already undertaken dramatic cost-saving measures across all areas of the business. But we now have no other choice but to reduce the size of our workforce.”


Locally, McLaren sales have slumped 37.5 per cent to the end of May, from 40 units to 25, compared to the overall industry skid of 23.9 per cent year-to-date.

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