October 23, 2014 / 10:14 AM / in 3 years

Caterham F1 team on brink of failure

LONDON (Reuters) - The Caterham Formula One team was on the brink of collapse on Thursday with employees locked out of the factory while past and present management traded accusations over who was to blame.

Even if an administrator held out some hope that the team might survive, time was running out with a Saturday deadline looming for the cars to be sent to Texas for next week’s U.S. Grand Prix in Austin and then on to Brazil.

“Everybody is prepared to go to Austin, the problem is that if the administrators are not changing their mind then it is difficult,” team advisor Colin Kolles told reporters in a conference call.

Finbarr O‘Connell, one of the administrators appointed to sort out the mess at the Leafield factory, told Reuters various parties had approached him to express interest either in the assets or keeping Caterham racing as an F1 team.

He made clear, however, that the cars could not leave without his agreement -- something that looked unlikely on Thursday with Kolles wishing him good luck “in Dreamland”.

“They (the staff) can’t get into the factory today,” said O’ Connell, a restructuring and recovery partner with London firm Smith and Williamson.

”They are using my facilities and haven’t paid me.

The threat of legal action hung over the team, which was run by Malaysian entrepreneur Tony Fernandes until July when a sale was announced to a shadowy group of Swiss and Middle Eastern investors advised by Kolles.

The situation has been complicated by the Formula One entry being held by 1Malaysia Racing Team while Caterham Sports Limited (CSL) employed staff, dealt with suppliers and manufactured the car.

CSL is now in administration, after bailiffs seized items earlier in the month, and lawyers are arguing over who owns what.

The 1MRT management, who say they own the cars, issued an explosive statement on Wednesday in which they threatened to walk away and take legal action against Fernandes for failing to transfer ownership to their company Engavest.

They followed that up with another declaration on Thursday saying that “Fernandes remains the owner of Caterham F1 and is fully responsible for all its activities.”

Fernandes, who runs the AirAsia airline and is chairman of struggling Premier League soccer side Queens Park Rangers as well as the Caterham Group that is separate from the F1 team, hit back in his own statement.

“Our agreement with Engavest was very clear: there was no legal obligation to transfer the shares to them unless certain conditions - which included paying creditors - were met. Those conditions have not been met,” he said.

”If you agree to buy a business, you must pay its bills. They have breached that promise and now, sadly, it is others such as the employees and the fans of the Caterham F1 team that will suffer if the team ceases to race.

“I sincerely hope that this will not be the case and that a solution can be found.”

In a slightly surreal twist to a story that is all too real to the team’s several hundred employees, Caterham Group CEO Graham Macdonald accused Engavest of appointing “one of their cleaners” as sole director and shareholder of the UK operating company.

“In short the new owners have paid us nothing and now the administrators have been appointed they want to walk away from their liabilities,” he added.

O‘Connell said that despite the air of crisis, there was still time to find a solution, even if Caterham management suggested he was being unrealistic in his expectations.

“Effectively 1MRT have been in the building for the last few days since I arrived,” said the administrator, who was appointed last Friday.

”We are trying to reach an acceptable arrangement for them to be there. We had a meeting yesterday with 1MRT and lawyers and the offer they made was unacceptable. So I’ve sent them away.

“Hopefully they can come up with an acceptable proposal.”

“I don’t think this is gone,” said O‘Connell of the team’s prospects for survival. “It’s just a case of who has got the money to make it work.”

Editing by Sudipto Ganguly and Martyn Herman

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