Yesterday’s move by majority owner George Gillett to shore-up the finances at Richard Petty Motorsports has apparently not convinced Petty himself to abandon a bid to purchase majority control of the operation. Gillett’s Booth Creek Resort Properties LLC sold its stock in the companies that operate the Northstar-at-Tahoe Ski Resort to Vail Resorts yesterday for $63 million, with that money expected to go directly toward the operation of Richard Petty Motorsports for the remainder of the season.
Gillett purchased a controlling interest in the team from Ray Evernham in August of 2007, but reportedly defaulted on the $90 million loan last February. He reportedly refused an offer by lender Wachovia Bank to buy out the loan for $35 million last summer, but has been unable to restructure the debt. Multiple sources with knowledge of the situation tell Sirius Speedway today that between Evernham, Wachovia and Roush, Gillett’s total RPM debt approaches $97 million.
Gillett had hoped to use assets from the sale of his Liverpool English Premier League soccer club to operate RPM and pay some of those racing debts, but the sale was approved by the league for $476 million; much less than Gillett had hoped for.
Sports Business Journal is reporting that RPM has hired the Gordian Group, a New York-based investment bank, to search for additional financing. Wachovia Bank has enlisted FTI Consulting to seek additional investors, as well. Petty enjoys a strong relationship with Wells Fargo Bank – parent company of Wachovia – which sponsored Kyle Petty’s entries at Petty Enterprises, and while Wachovia has declined to comment on the story, informed observers wonder if Petty might be able to assemble the financing necessary to purchase the note and complete a defacto hostile takeover of the team that bears his name.
Gillett does not own Richard Petty Motorsports. Wachovia Bank owns RPM, and has since Gillett defaulted on the $90 million loan last spring. In fact, Gillett could soon be facing the same ssenario he encountered earlier this month with his Liverpool Soccer Club. By defaulting on his bank notes, he placed both Liverpool and RPM into the hands of the banks. Once that occurs, the lending institutions have five options:
1) Refinance Gillett’s loan. In both cases, the banks have been unwilling to do so.
2) Allow Gillett to soldier on with RPM in hope that he makes periodic payments on the note.
3) Foreclose on the note and seize control of the team. This is not a realistic option, since investment bankers know nothing about running soccer or race teams.
4) Foreclose on the note, shut down the team and sell off its assets. Those assets consist of a few race cars and engines, three or four buildings – though not the team’s current shop, which is rented -- transporters and three airplanes. There is virtually no machinery left from what was once Petty Enterprises and Evernham Motorsports, since the team buys its cars and engines from Roush Fenway Racing.
5) Sell the note to someone else and recoup a percentage of the loan. Royal Bank of Scotland sold the Liverpool Soccer Club to New England Sports Ventures against Gillett’s wishes, for an amount less than what was owed. Wachovia could do the same, if someone comes forward with an acceptable offer. Like he did in Liverpool, George Gillett could find himself forced out of RPM against his wishes.
Sources say that Wachovia Bank would likely sell what’s left of Richard Petty Motorsports to someone -- say Petty himself -- for approximately $5 million. Another $10 million would get the team to Daytona for SpeedWeek 2011, so in effect, Richard Petty Motorsports could be wrenched from Gillett's grasp; lock, stock and barrel for approximately $15M. Gillett would walk away debt free.
There is one final angle to this story. Multiple sources tell Sirius Speedway that Petty met with representatives from Toyota and Michael Waltrip Racing earlier this week to discuss fielding his legendary #43 out of the MWR stables, if RPM is unable to continue. Sources close to those discussions say they are unlikely to bear fruit.