The McLaren Group has launched legal action in an effort to secure urgent funding to keep it from having to sell a stake in its Formula 1 team, reports the BBC.
McLaren has hit financial difficulty as sales of its cars have plunged to an all-time low thanks to the coronavirus pandemic, whilst revenues from F1 are also set to fall as a result of fewer races.
The automotive group attempted to raise additional funding by securing a loan against its heritage collection and Surrey factory, which could raise as much as £275 million.
However a group of existing investors have blocked the move, claiming a bonds issue in 2017, which raised £600m, is already secured against these assets and therefore securing further loans against them is not possible.
Its shareholders previously injected a further £291m into the company earlier this year as a result of coronavirus, but McLaren has burned through this cash and requires further funding to secure its future.
A High Court case has been raised by McLaren in an attempt confirm that it can use those assets as collateral, or that it can sell them, to raise further funds.
The expedited hearing is set to go ahead this week.
In the court documents, McLaren says it will face an “impending liquidity shortfall” without urgent action as a result of the pandemic creating a “severe strain on the group’s cash flow”.
McLaren Automotive posted a £133m loss for the opening quarter of 2020 and is expected to post a further loss as much of the world entered lockdown in late-March and heavy restrictions remain in place.
“The scale and impact of the pandemic quickly became apparent to the senior management of the (McLaren) group,” added the documents.
“The pandemic has had a massive and detrimental effect on the group’s trading performance.
“The start of the F1 season has been delayed. Car dealerships have temporarily closed; supplies have been interrupted; manufacturing has been suspended or impeded; customer orders have declined; sponsorship revenues have fallen and additional costs have arisen from health and safety measures.”
The group is also exploring a partial sale of its F1 team, though this is believed to be a last resort once other options are exhausted.
Last month it announced it would lay off 1,200 employees – 70 from its F1 operation – as a result of the British government refusing a £150m business loan.
Its shareholders, which include Mumtalakat, the sovereign wealth fund of the Bahraini royal family, Saudi billionaire Mansour Ojjeh and the Canadian Michael Latifi – whose son Nicholas races for Williams – have refused to inject any further money into the business.