The Full Transcript of Walkinshaw's Press Conference

The following is a full transcript of a press conference with Arrows team boss Tom Walkinshaw in the Orange Arrows motorhome at the British Grand Prix. After securing a late-night agreement with engine suppliers Cosworth to allow his team to run in the Saturday morning practice sessions and for the rest of the weekend, he explained the current situation of the team.

Q: On Thursday, your lawyer said you were doomed barring miracles and you are here. How have you done it?

Tom Walkinshaw:

The whole thing is very complicated in that Morgan Grenfell were trying to extract a value to their shareholding from the investors that were coming in the company and the investors were not prepared to pay Morgan Grenfell the price they were demanding to agree a deal. They had prevented any of us doing any funding to the company that I had been doing in the past so we ended up getting into a situation that where if we couldn't put new money in or the existing parties were not allowed to contribute any more then the company was going to go into an insolvent position. That's the situation that has built up over the past month. It is all very complicated and at the end of the day, after the High Court hearing, we had to get permission from Morgan Grenfell and actually sort things out for this weekend. It has been very complicated. It is a very complicated issue that started off a year ago when Coral Eurobet failed to pay us the money, and they are owned by Morgan Grenfell.

The directors of the company at that time determined the company needed new funding in and Morgan Grenfell agreed to all that. All the resolutions and everything that control that documentation are here [points to document he is holding]. When we got a new investor coming in in the spring, which was held up by the events of September 11 and what have you - all the people we were talking to last year, of course, did nothing for quite some time and the people who were interested in investing only started showing an interest again in the spring of this year. When we notified Morgan Grenfell in April that we actually had an investor who would take up the original transaction, they then threw an injunction on the company preventing them completing the transaction and they then indicated to us that they would prefer that any new investor bought their shareholding rather than invest in the company. That's when it started and it has rumbled on to this ridiculous conclusion.

Q: Let us just confirm one thing, you are definitely racing this weekend?

TW:

Yeah, we will be racing this weekend.

Q: You have sorted out the problem with Cosworth as well, the $4.75 million dollars or so?

TW:

We have sorted out the engines from Cosworth for the weekend and we are racing.

Q: You have paid the money. Because Niki Lauda was saying earlier this week that you have had numerous deadlines...

TW:

I think Niki has said a lot of things and it is probably best if I don't comment. They have been paid for the engines that we will be using for the weekend.

Q: Just a word on what the judge had to say, because it was very damning. There were serious allegations of insolvency and liquidation and fraud. How do you answer those?

TW:

Well, it's complicated because on all the offers that have come in to the company I had a pre-condition on anybody making an offer that all our trade creditors would take priority over everyone else and that has been our position. Bernie Ecclestone says he is quite happy to confirm what I am telling you now. He was privy to some of the meetings of people who were making offers to the company and I wasn't prepared to take any offer from anyone that would discount the value to the trade creditors of Arrows. I had a condition that they were put in front of any of the shareholders or any other person. We, with Morgan Grenfell, worked out a private protest letter, we call it in finance speak. I can't tell you the details but the offer that came in from Red Bull last week and the other people who have also offered, each one of them can comply fully with the terms that we agreed with Morgan Grenfell and the pre-conditions I had already made that trade creditors would take priority. When it went to court we were prevented from disclosing to the court a lot of information, including the without prejudice prior agreement with Morgan Grenfell, so I can understand why the judge arrived at what he did because it looked like we were trying to go and pull a fast one by putting trade creditors in front of secure creditors and we were not allowed to put the evidence in front of him to show that this was not as normal.

Q: How damaging is that, though, to Red Bull and other investors who would read that you are allegedly insolvent and allegedly fraudulent?

TW:

The company has never been insolvent and there has never been any fraudulent trading or any irregularities that I am aware of but if he is blocked from having the full evidence then you can quite understand why he would get the judgement that he got.

Q: Is this a short-term fix. You got through this weekend, but is the French Grand Prix a doubt?

TW:

We are negotiating now with three different parties who are interested in maybe acquiring the team as a whole or in making a partial investment in the team and that will continue over the next couple of weeks. We had confirmation from two of them yesterday (Friday) that they still want to continue with the negotiations and hopefully that will be sorted before Magny-Cours.

Q: You said it was quite complicated but what kind of rescue plan do you have in mind?

TW:

There wasn't need of a rescue plan before got involved in all the financial muscle flexing. As I said, the team has interests from a lot of people in different areas. There are three different parties that both ourselves and Morgan Grenfell have identified to have substantial substance behind them, who wish either to have a partial interest in the team or a total interest in the team. So I would be optimistic that the future of Arrows is secure. Whether I have any part of it or not is completely different because with the agreement we have with Morgan Grenfell, if we have an offer for the whole team that is satisfactory then we will sell the complete team. Also if we have an offer for a partial part of the team we also have a pre-agreement of how those funds would be distributed to the team and to the shareholders. The basis of doing something has been in place I don't see a doomsday scenario looming. It would have been a lot better if we had avoided the mess that went on last week but hopefully we can get it back on track in the next two weeks.

Q: As far as I know, Morgan Grenfell are owned by Deutsche Bank in Germany. Are they involved in the situation?

TW:

Morgan Grenfell retained a company to handle the negotiations on their behalf called Vision Capital, and the negotiations have taken place with Vision Capital and Morgan Grenfell. Deutsche Bank have not been involved.

Q: When and how was it possible to do the deal with Cosworth?

TW:

The agreement with Cosworth was worked out yesterday. It was a long day.

Q: You tell us the engines are paid for for this race. Does that mean that for France it is still not clear? Do you have a race-by-race basis in terms of securing money for the engines?

TW:

The deal with Cosworth is confidential. We have been asked to pay for the engines for this weekend and I confirmed we have done that. The rest of the deal is confidential.

Q: How did you get into the position where your co-owners took you to court?

TW:

If you could see the documents you would understand it better. We had an agreement a year ago where Morgan Grenfell converted a loan. When Prince Malik did not come up with his money, he came with them, and they had to put money in that was missing from him. So they put it in as a long-term loan. So they had, effectively, debenture in the company. Last year, when the Coral money didn't arrive, the directors of the company, which included Morgan Grenfell representatives, went to the shareholders and said 'well the shareholders have to make up that sum of money because it is missing from the budget'. Morgan Grenfell's fund was topped out so they couldn't put any more money in and they agreed to be diluted in position in the shareholding and they took preference shares in place of their debenture. And that then had a 10-year repayment schedule.

Q: Was that in the July 11 letter - didn't the judge say it was binding?

TW:

The judge may have said it but it doesn't mean to say he was right. There has been 15 million invested in the company on the date of that letter and Morgan Grenfell didn't complain from last July until this April until the new investor came along, and then they set aside that letter so that they could then demand that they got the shareholding acquired rather than the money going to the company. It is very complicated and if I was here for an hour and a half it is probably the time I would need to explain it. They maintained then that the charge was back in place, the company and its advisors, and they have taken advice on it, say it is not, but get that sorted out by the normal judicial process would probably take you 18 months to two years, and we have got to get a deal done in two or three weeks. So what we have got to do, as they had to suck off all the funding to the team...I mean the team was never insolvent because I kept putting the money in.

Let's take the bullshit away, right. I kept putting the money in and I underwrote the entire share issue. When the market turned last September the directors of the company demanded that they had security that they were trading properly, so the share issue was underwritten with a put option from the company at any time that if they couldn't find an external third party investor, and that was agreed as well with the Morgan Grenfell people. Now the situation changed when we got an investor coming in who was wanting to invest and take a third of the company then they changed the position. To be fair on them their position also changed because a year ago they were going to be in business a long time and I believe that now the plan is to actually wind up everything in Morgan Grenfell and take it back into Deutsche Bank, so their circumstances changed dramatically as well. All the people that we worked with before have now left the company so it is a very intricate scenario, which we need time to really take into detail. But I will tell you 100 percent that this country has never traded fraudulently, has never been insolvent.

Q: On the emotional side, how close did you get? Did you think at any point, this is it?

TW:

You are never dead until you are dead. The ludicrous situation here is that we have probably had 50 percent of the value of this company eroded by the mechanisms that have gone on to try to extract more value for one party than the other. If the deal was agreed, everybody would have been given substantial sums of money and there was not a single person that wasn't getting paid in full and the shareholders were also getting a substantial sum of money. I don't think that anyone who is outside this industry understands how quickly things go around in Formula One. On the track or off the track, they don't realise that if you miss one event for the wrong reasons, then you are out the club. That's instant. And they also don't understand that you there won't be any sympathy because most of the money that you would have got will be split up between the rest of them. It's a very gladiatorial environment that we have in Formula One and it is part of its allure as well. It's a survival of the fittest. Normal people don't understand that. They think that anything going on with the company will fall into the classic timescales - you can do a little bit here but then you'll fix it next week and you have got room to manoeuvre. They don't understand that in Formula One, on the track or off the track, if you make a mistake it is usually catastrophic and it happens instantly.

Q: Can you say who the three investors are?

TW:

I am not allowed to disclose who the people are. We probably had about 10 inquiries, of which we whittled down to three people with real substance behind it. There are a lot of things that I am allowed to do and I am not allowed to do, and I have got notes here of what I am permitted to say and not permitted to say.

Q: But are you looking to sell and to get out of Arrows?

TW:

We have to agree to do whatever we need to do, and as I said if an offer comes in for the right value and you have to sell everything then we are obliged to do so because that is the terms of the shareholder agreement that there was initially with Morgan Grenfell. It is the classic venture capitalist investment in a company that if you find a buyer then you have either got to sell or buy them out to get value. So we have to wait and see what happens.

Q: Did you pay for the engines this weekend yourself?

TW:

The money for the engines this weekend I paid myself, yes.

Q: Do you think missing the practice yesterday (Friday) ruin your hopes for the race?

TW:

Well it sure as hell ruined my day yesterday! I don't think we lost very much because of the weather. I don't think it will really affect the race weekend very much. I felt sorry for all my staff yesterday, they kept coming and telling me they were right behind me and not to worry about them but just go on and do what I could, so I did that. We had a chat last night and we will get on with the job today.

Q: Has your relationship with Morgan Grenfell become strained?

TW:

It would be an understatement to say that our relationship with Morgan Grenfell have become strained! Anyway, we won't allow that to interfere with sorting out the affairs of the company.

Q: As things stand at the moment, do you know whether you will be able to complete the season?

TW:

I would think that Arrows will be able to complete the season, yes. Common sense must prevail. You cannot have an injunction that prevents any funding to the team whatsoever and that bleeds it dry and then say that we will complete it but I would hope that common sense will prevail and that there will be an agreement on how you compete that actually takes into account the environment we find ourselves in in Formula One. And that's what was missing before. I think we were a little bit short-sighted the environment we are in.

Q: So you need more investment to complete the season?

TW:

Not necessarily. If we were allowed to do it we could do it, but once I am prevented from providing doing it, if we don't have a new investor then you have a problem and if you can only get a new investor in in certain conditions that cannot be achieved then it is difficult, you know. People think that a Formula One team is worth over $100 million (Dollars). Now it may have been that until a few years ago, but at the moment I can tell you that most of them up and down the pitlane would sell for a hell of a lot less than that.

Q: Is there any news on the Jos Verstappen case?

TW:

I don't have any news on that.

Q: If you do end up selling up, will that be the end of your personal involvement in Formula One?

TW:

Ha, ha. Why don't you just wait and see?