A question of dough

April 3, 2012

The Mole had decided that afternoon that it would be a good moment to do some Spring gardening and he was happily forking away behind the shed when The Colonel stuck his head over the hedge.

“Hello old boy,” he said. “What are you up to?”

“I’m digging,” said The Mole. “…and stating the obvious.”

The remark flew so high over The Colonel’s head that it would have gone for six if they had been playing cricket.

“I was wondering if Mrs Batty has made any of those lovely scone-things,” said The Colonel. “They go down awfully well with a cup of tea.”

The Mole paused. The Colonel was rarely right about very much, but on this occasion he felt that there might be just a hint of wisdom in the remark. He stared at the dirt for a moment. A worm looked up at him, hoping that he would take The Colonel’s advice and stop upsetting the annelid urban planning that had been going on quietly for months.

The Mole looked up.

“You know,” he said. “I think you are right. Those scone-things are really rather good and I believe we even have some clotted cream. And as I recall Mrs Batty still has a pot of that spectacular strawberry jam, which she sweetened with a hint of honey. Yes, it is time for tea. A quintessential part of the Britain way of life. An afternoon in the garden without tea is like pomp without circumstance; a bowler hat without an umbrella.”

“Yorkshire without pudding,” said The Colonel.

“Such traditions need to be preserved,” The Mole went on. “When I was a lad a visit to the bakery was an adventure. There were sticky buns, Eccles cakes, custard tarts, gingerbread men, Bakewell tarts, jam tarts, treacle tarts, rock cakes, tea cakes, lardy cakes, marble cakes, Battenburg cakes, sponges, Bath buns, sticky buns, cream puffs, doughnuts, apple turnovers, jam rolls, shortbread, malt loaf… and so much more.

“And now what? Nasty American brownies and cup cakes, Mr Kipling, great puffy eclairs and those gaudy little macaroons that have been parachuted in from France. Britain has been invaded by foreign baked goods. Only the scone remains to repel the alien forces. The problem with a scone is that it must be fresh from the oven, so you just cannot buy a good one in a supermarket. It’s impossible. Mrs Batty says that the secret is to treat the dough like you would a little baby. Don’t roll it, don’t twist the cutting device.”

“You have to look after the dough?” said The Colonel. “Mr Ecclestone would be good at making scones.”

The Mole chortled and the pair walked up towards Mole Manor, The Colonel having popped through the hole in the hedge that the two had been using, like naughty schoolboys, for many happy years.

“Tea!” shouted The Mole, as he opened the French windows. There was a rustling in the kitchen, and perhaps the subtle sound of a sherry bottle being shoved behind a porridge box. Mrs Batty replied “Coming up.”

Mrs Mole appeared from her lair in the library.

“Jolly good,” she said, “But if you don’t mind I have to save some donkeys from evil foreign people. I’m in the middle of a letter to our MP.”

“Right-ho,” said The Mole. “Splendid idea. The world needs more donkeys.”

He winked at The Colonel, who was rolling his eyes. The Mole popped his head into the kitchen and said something to Mrs Batty about scones and jam and then the two men settled into chairs in the conservatory and waited gleefully for their treat.

“What’s this I hear about those ghastly people at CVC borrowing more money,” said The Colonel.

“Yes,” said The Mole. “They are. They loaded up the Formula One business with $2.92 billion of debt back in 2006 when they bought the whole shebang. That meant they pocketed a pile of cash up front and made an instant profit. Since then F1 has been a cash cow, paying the interest on the loans and pouring any and all available money into reducing the debt. They were due to be paid off fully in 2013 or 2014.”

“And that is why F1 has been off in Asia,” said The Colonel. “To pay all the bills?”

“In essence,” said The Mole. “The folks out east will pay more for F1 because it makes them feel like world powers and the Europeans have not been able to compete. There’s this thing called democracy that gets in the way.”

“So why are CVC borrowing more money?” said The Colonel.

The Mole paused for a second and Mrs Batty arrived with a tray of delights. It took a while for plates to be loaded and cups filled.

“CVC now wants to raise another $2.27 billion, which will mature in 2017-2018,” said The Mole, eyeing a scone. The Colonel could not say anything as he already had a mouthful of glorious things.

“They are saying that the new loans will provide the business with a secure, long term capital structure and insist that they are not simply going to pay themselves some more money,” The Mole explained. “They will keep all extra money for, what was the term, ah yes, general corporate purposes.”

The Mole bit into his scone.

“What the hell does that mean?” said The Colonel. “Bigger lunches? Flashier company cars? Jets?”

There was a moment of silence as The Mole finished his mouthful and took a large swig of tea and sighed with contentment.

“I think they will use the extra money to buy the 15.3 percent of the group that is owned by Lehman Brothers,” he said. “This is up for sale as Lehmans is liquidating all its assets. By doing this CVC will push up the valuation of Formula One to around $10 billion, on paper at least. That would raise the CVC holding to 78.6 percent. I think that they would also use some of the new cash to give the teams signing bonuses to get them to agree to a new five-year Concorde Agreement. And I’m pretty sure it is also to do with the lower interest rates at the moment. The whole operation will also CVC some time to sort out other problems that are holding down the value of the business. There is the problem of a succession to Bernie. He’s 81 and cannot go on forever. His legal problems will also have gone away in a few years, one way or another. That would then clear the way for CVC to flog the business, or go to the stock market for an IPO.”

“So F1 remains a cash cow?” said The Colonel.

“It does,” said The Mole. “A shame, but that is what happens when you sell things to finance people. The only downside of all this for CVC is that it gives the teams another opportunity to be clever. In five years from now they might have learned from their mistakes and can work together more, perhaps even supporting one another financially to reduce the reliance on money from the Formula One group. If they could really work together they could drive down the value of the sport as a business and could then buy it. Or find someone more sensible to buy it. If CVC Capital Partners can buy a business with borrowed money then it seems to me that other people can as well.”

“A white knight,” said The Colonel.

“Indeed,” said The Mole, as he reached for his scone.

Yes, he thought, it is all down to the dough.



  1. “They loaded up the Formula One business with $2.92 million of debt back in 2006 when they bought the whole shebang. ”

    Hell I could have bought that. I think you mean Billion.

  2. mmm scones,

  3. Oh dear an important aspect has been missed here, Devon or Cornwall? Scone assembly with jam and cream, one county has the jam next the scone while the other requires the cream first, but which is which?

  4. or the F1 boys could get organised take their toys and play somewhere else and **** CVC

  5. I know The Colonel is a bit basic, but I think the Mole could at least make a stab at explaining to him the difference between money that is cash and money that is income. I am sure he knows that money that is cash can be used to buy out Lehman Brothers shares, but can’t be used for the operating costs of the business (unless you need to run at a loss and you have liquidity problems, which would be odd for a ‘cash cow’). Which rules out quite a lot of things. I guess explaining that to The Colonel could be tricky though.

  6. Dear Mole
    Thought you might find this interesting, though it is public:
    “Molson Coors Brewing Company will pay US$3.5 billion to acquire StarBev…Molson Coors is acquiring the business from CVC Capital Partners Ltd., which operates several funds that have owned StarBev since 2009” (CBC News web page, April 3, 2012).
    I hope she actually had some clotted cream for you – amazing stuff – I wish we could get it in CBC land.

  7. Shouldn’t it say BattenbErg cakes as in Mountbatten 😉

  8. Only one criticism: the Mole missed a good opportunity to also rail against the foreign invasion of the living room. French windows. Is nothing sacred!?

  9. There is one very vital component left missing in this critique of CVC and the current financial structure of Formula 1.

    In order to substantiate your claims, which are largely non specific, yet clearly infused with the inference that CVC ownership has been detrimental to the overall health of the sport, some detailed study should be presented that documents the status of Formula 1 prior to CVC involvement, and the current state of affairs.

    It is quite easy to portray CVC,and Mr. Ecclestone,, as the symbols of all that is wrong with Formula 1, particularly with the still as yet unresolved matters pending in Germany. Being objective and fair, Formula 1 owes as much or more to Mr. Ecclestone, than he will ever owe to the sport of Grand Prix racing. Everyone knows the moribund state of affairs that confronted individual teams prior to the early days of FOCA,.The chronic inability of individual teams to cooperate is legendary.

    The mere fact that there are billions to discuss, these discussions testify to the brilliance and the vision, the determination and promotional genius of one man, who conveniently becomes the scapegoat for the short lived memories of all who find fault with him now.

    Keep in mind, the Concorde Agreement is not signed while holding a gun to anyone’s head. If Stefano Domenicali believes he can perform more credibly as the Director of the Formula 1 Grand Prix enterprise, than he and his supporters are quite free to raise the required capital, assume the concomitant risk, and have a go.

    Reality is this. They could not get themselves arrested prior to Bernie organizing FOCA and launching into the modern age. The teams themselves are far better off than they ever could have imagined prior to Mr. Ecclestone, and they will hurt themselves and destroy the sport if thje foolishly attempt to go it alone.

    They couldn’t do it prior to FOCA, and they cannot do it now.

  10. “A worm looked up at him, hoping that he would take The Colonel’s advice and stop upsetting the annelid urban planning that had been going on quietly for months.”

    Joe, I think that the sequel to Watership Down is just waiting to be written. By you.

    • The Mole will be upset

  11. Slim pickings..?

  12. I’ve just found my most favourite ever, ever web-blog-thingy! I am very chuffed. Keep digging Mole.

  13. I have always wondered why more time is not spent on TV coverage on the wheel to wheel stuff further down the pack in order to generate more air time for sponsors that will come to F1, not teams, and have space on the “blank” cars.

    We know the iced buns, chocy éclair ( and even the odd red velvet cake) are, un-dramatically, going round in circles at the front, so perhaps we should think about the above and some sprinkles for the poor Tiffin at the back….

  14. I agree teams learn from their mistakes, but to coordinate and buy the business together? I think that is a stretch based on recent form and antithetical to most teams, one in particular.

    Now if they could find a third party buyer but guarantee how much they are paid, that’s an other thing entirely. Who gets how big a slice, that too will be interesting.

    There is only one person who can “herd cats”, & that’s Mr E

  15. Very nice stuff. Being from Australia, the purchase of the Nine Group which comprises all the media and publishing entities once owned by the late Kerry Packer, was purchased by CVC in late 2007 just before the global financial crisis. On top of the enormous outlay, the magazine companies are doing poorly and channel nine, once the broadcaster of Formula 1 in Australia is on the ropes. Any money CVC earn from Formula 1 may well go towards easing the pain brought about by this terrible investment.

  16. Any idea who the white knight might be?

  17. “CVC now wants to raise another $2.27 billion”

    Sadly for the otherwise good story it’s actually just rolling over the same loan to a longer date and paying 650m back at the same time.

    • And none of the old loan was paid off?

  18. Another attack on protesters that was not reported in Al Jazeera or Gulf News http://article.wn.com/view/2012/04/06/Police_descend_on_Bahrain_rally_for_hunger_striker_2/

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