Dorna's New Owners Engage In More Debt Refinancing

The key role that money plays in motorcycle racing was once again underlined when Bridgepoint Capital, the private equity firm which owns a large part of Dorna, announced it was selling a 39% stake in the organizer of MotoGP and World Superbikes. That stake was sold to CPPIB, a Canadian pension fund, the combining of WSBK and MotoGP under the umbrella of Dorna having been a prime mover for the sale.

One of the first things the new owners have done is opened up bidding for refinancing of the debts Dorna is encumbered with. According to reports in Bloomberg Businessweek, Bridgepoint and CPPIB have hired the French bank Societe Generale to help arrange financing covering some 485 million euros of debt. The debt being renegotiated includes existing debt placed on the company, as well as debt being used to refund shareholder loans, according to the reports. A meeting is scheduled for this week, where potential lenders will be offered the chance to bid on the loans.

The debt refinancing is the second round of loan refinancing in eighteen months. An earlier deal to take advantage of historically low interest rates was announced back in May 2011. That deal involved approximately 440 million euros, less than the current round of debt restructuring.

One interesting detail from the news of debt restructuring is that the Bloomberg article quotes the 485 million euro sum being refinanced as being approximately six times Dorna's earnings before tax and interest payments. That would put Dorna's income before tax and interest payments at around 80 million euros, on top of a turnover likely to be well over 200 million euros. However, though Dorna's earnings are private, an interview from 2010 on GPOne revealed that Dorna's after-tax profit is around 8 million euros. The difference between the pre-tax and after-tax earnings indicates that the interest burden on Dorna is significant.

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I think you meant to write "six times" not "one sixth."

And yeah, that is a lot of debt. When you have a really solid cash flow, you can borrow a lot. I am surprised they have so much given the risk of the overall business.

Thanks Mike. An error I often make is rewriting a sentence several different times and then getting my directions mixed and saying the opposite of what I meant. Sorry.

i see the Canadian Pension Plan investing in MotoGP as a very poor decision.

refinancing a debt burden is a terrible business plan - if only the average Canadian knew about this deal.

In fact most Canadians do not even know that motorcycles race and of course we do not have any world series visiting Canada.

As a Canadian the whole things smells like shenanigans to me and I wish they picked something that I have a little more faith in. Like just about anything...