F1 racing receives nearly $1.5 billion of restructuring

Liberty Media has made changes in the business strategy as well as “pouring money” into F1. It is going through this extremely challenging period with the COVID-19 pandemic.

Liberty Media must have revenue – F1 racing

Recently, Liberty Media, the current F1 management unit, “redistributed” which is  “assets” between their subsidiaries to bring money to Formula 1 during the COVID-19 pandemic have a great impact on the tournament.

Liberty restructured to “pour” money to support F1
Liberty restructured to “pour” money to support F1

The deal was made between FWON (F1 is holding company of Liberty) and SiriusXM, a communications company based in Manhattan, New York, USA, which is a subsidiary of Liberty Media.

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The major change for the deal is that the company promotes the organization of events – Live Nation, previously “in the same house” as F1, will now join SiriusXM.

In addition to the purpose of bringing greater money to F1, the main reason for this decision of Liberty Media is because both F1 and Live Nation need to take place events to bring about revenue. However, the current situation, both are becoming a big source of risk for the parent company. From there, Liberty Media was forced to “put one egg in another basket” to divide the risks evenly among its subsidiaries.

On the other hand, it is also a logical move to put a company promoting events (concerts) in conjunction with a media company, rather than on motorsport like F1.

Approximately USD 1.5 billion of assets were transferred from F1 Group to Liberty Media SiriusXM, totaling USD 2.8 billion assets and USD 1.3 billion outstanding loans. Of these, shares of Live Nation accounted for USD 2.6 billion in the above data.

That conversion is balanced by the amount of US $ 1.5 billion of net assets transferred from Liberty Media SiriusXM to F1 Group, including a cash amount of US $ 1.4 billion, of which 50% is considered as an inter-bank loan company.

How to keep the tournament vitality?

Liberty Media expects this change will help them in the stock market related to the F1 business. That brings liquidity to F1 in case the season continues to be delayed.

Meanwhile, F1 racing teams are also paid a portion of their current income, earlier than expected to support them through difficult times during the epidemic. Top teams have guaranteed guarantees under former boss Bernie Ecclestone, but smaller racing teams rely almost entirely on F1’s annual bonus.

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F1 is still trying to start the season, with a high probability there will be no audience. That will affect the revenue of every F1 event. But instead, the tournament will get revenue from media outlets that broadcast races, as well as sponsor partners.

Financial problems are being focused in this difficult time
Financial problems are being focused in this difficult time

Organizing a race will certainly cost a considerable amount of money to local organizers as well as tournaments, which will not be reduced. Liberty Media is ready for the possibility that the race will have low revenue, even just breakeven.

The important is how to keep the tournament alive while continuing to bring “mental food” to the fans, as well as keeping the participating racing teams from bankruptcy.

Therefore, the transition between subsidiaries as well as paying a part of the bonus for racing teams is a reasonable step for Liberty Media at this time.

After all, without the participating teams, there will be no more F1 to serve other purposes. Therefore, they need to calculate the long distance for all current teams, not only the 2021 or 2022 plan but also more. Since then, the next Concorde agreement plays an important role in the travel or accommodation of many racing teams.