A question of doughApril 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.