Formula 1, 2019 - Page 44 - McLaren Life
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post #646 of 672 Old 05-16-2019, 03:57 PM
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You must not be watching Hamilton that much, then. Hamilton has always sought out the weird lines for more grip. Several times in places Verstappen has never even thought of (final corner of Spa in 2018 for example)
I'm not saying that you're wrong about the final corner of Spa 2018 (I presume you are referring to qualifying when the track was damp, not to the race when it was dry), but I have just looked at a replay of his pole lap and his line through the final corner (left out of Bus Stop chicane) is normal.
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post #647 of 672 Old 05-16-2019, 04:06 PM Thread Starter
 
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Moody's Investors Service
McLaren Finance PLC
McLaren Holdings Limited

Assignment of B2 Ratings

London, 16 May 2019 -- Moody's Investors Service (Moody's) has today changed the outlook to negative from stable for McLaren Holdings Limited (McLaren, company) and McLaren Finance PLC. Concurrently, Moody's has affirmed the B2 corporate family rating (CFR), B2-PD probability of default rating (PDR) of the company and B2 instrument ratings at McLaren Finance PLC.

RATINGS RATIONALE

The outlook change reflects the delay in achieving financial metrics that are in line with the B2 rating, including Moody's-adjusted debt/EBITDA of 6.0x and positive free cash flow after investments and interest. While Moody's recognizes the successful ramp-up of production volumes in the Automotive division and associated strong EBITDA growth, significant ongoing R&D investments and the choice to make certain changes in the Racing division, Formula One, resulting in significant losses, will reduce the pace of Moody's-adjusted EBITDA improvements at least until 2020.

McLaren's consolidated revenue increased 44.3% to GBP1.3 billion in 2018 and company-adjusted EBITDA improved 220% to GBP143 million in 2018. However, since Moody's expenses development costs, Moody's-adjusted EBITDA was negative and leverage stood at -4.9x. Similarly, free cash flow remained very negative due to the company's choice to continue with high investment levels as part of its Track25 plan. While the company should continue to generate meaningful improvements in profitability in 2019 and 2020 on the back of a full year sales of the McLaren Senna or in 2020 the sale of the McLaren Speedtail, Moody's also expects investment levels to remain close to 2018 for at least 2019 while Racing losses are likely to remain significant for both 2019 and 2020. Accordingly, the negative outlook reflects a greater risk to achieving a Moody's-adjusted debt/EBITDA of 6.0x on a sustained basis in the coming years and heightened risk of a downgrade.

Moody's recognizes that Racing losses are partly the result of choices made such as the change in engine. These losses have the potential to meaningfully decrease in 2021 given the pending plans to introduce a cost cap in Formula One. However, even in this case it remains uncertain at this stage whether a Moody's-adjusted debt/EBITDA of 6.0x will be achieved on a sustainable basis, which also depends on the company's investment plans at the time.

The affirmation of the ratings continues to reflect the (1) leading position as a designer and manufacturer of luxury cars across multiple price points; (2) strong brand recognition underpinned by the company's historical racing prowess as well as through the success of its performance car model launches; (3) high pricing power reflecting the demand for its vehicles that comfortably exceeds anticipated production; (4) clear focus on innovation and leading technological capabilities that are leveraged across the group; (5) customer diversification across multiple geographies; (6) meaningful revenue visibility reflecting the order backlog for its cars and through Formula 1 sponsorship arrangements and (7) supportive shareholder base.

However, the ratings also take into account (1) the high leverage and negative free cash flow; (2) shorter track record of producing road cars than for other manufacturers albeit mitigated by the success of its successful model launches and volume ramp-up; (3) significantly loss-making Racing activities that affect the financial strength of the company; (4) a degree of execution risk of ramping up automotive production to 6,000 cars per year by 2025; and (5) requirement to invest heavily in R&D activities to maintain its position as a technological leader. Moody's also notes a degree of uncertainty from Brexit, given the company's UK-based production and significant imports (suppliers) and exports (customers) to and from the EU.

Moody's considers McLaren's liquidity as adequate notwithstanding the significant investment plans announced through its Track25 plan for the Automotive business with GBP1.2 billion of investment from mid-2018 until 2025. As of December 2018, the company had GBP97 million of cash and GBP78 million available under the GBP90 million revolving credit facility (RCF) due 2022. Moody's understands that the company has further added GBP20 million of ancillary overdraft facilities in April 2019 as permitted under the RCF documentation and has received most of the remaining equity contribution, previously announced in 2018. The liquidity profile also continues to remain supported by the significant deposits contributed by customers well ahead of the sale of the cars. These sources should be sufficient to cover likely continued negative free cash flow for at least 2019 and a residual payment to a former shareholder later in the year. Moody's understands that the company expects limited further cash needs in 2020, but Moody's considers that this is also subject to some uncertainty as it depends on a continued strong EBITDA growth trajectory and no additional investment needs beyond the current plans. The next larger debt bullet maturity includes the GBP370 million and $250 million of senior secured notes that are due in July 2022. The company also has, as of December 2018, GBP109 million of uncommitted trade financing outstanding (2017: GBP44.8 million).

What Could Change The Rating Up/Down

Although unlikely given the negative outlook, Moody's-adjusted debt/EBITDA trending below 4.0x and a sustainably positive free cash flow could result in positive pressure on the rating. Conversely, negative pressure on the rating could increase from low profitability, Moody's-adjusted leverage staying above 6.0x, continued negative free cash flow or deteriorating liquidity. External events that negatively impact the McLaren brand could also cause negative pressure. Moody's notes that the rating and outlook do not incorporate the impact of a "no-deal Brexit", which could lead to negative implications for the outlook or rating.

METHODOLOGY

The principal methodology used in these ratings was Automobile Manufacturer Industry published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

https://www.moodys.com/research/Mood...med--PR_400656
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post #648 of 672 Old 05-16-2019, 04:15 PM Thread Starter
 
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I'm not saying that you're wrong about the final corner of Spa 2018 (I presume you are referring to qualifying when the track was damp, not to the race when it was dry), but I have just looked at a replay of his pole lap and his line through the final corner (left out of Bus Stop chicane) is normal.
Yes. IIRC it was more about his qual lap being 3 seconds better than anyone else
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post #649 of 672 Old 05-16-2019, 04:16 PM
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Interesting, they seem to be taking most things into consideration but drawing different conclusions from McLaren themselves.
I wonder who will prove to be right?

He who asks a question looks foolish for 5 minutes. He who doesn't ask a question remains foolish forever.

PS - nothing I say should be taken seriously but I am lucky enough to live in Woking and do get to see a lot of McLarens
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post #650 of 672 Old 05-16-2019, 04:36 PM
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Yes. IIRC it was more about his qual lap being 3 seconds better than anyone else …
Perhaps. although the post specifically referred to how Hamilton has "always sought out weird lines for more grip."
When it's wet, in general Hamilton - and nowadays most drivers - takes the so-called "karting line", where the pebbles embedded in the asphalt are less polished owing to relative lack of use. As I say, that is pretty normal; Hamilton is just better at it than most of the others.

Saying that, when they were both at McLaren, Jenson Button was known as being slightly better than Hamilton in changing conditions, when you had to judge lap-by-lap when to take the normal line and when to take the karting line (or something else), when to change tyres, and how to control the temperature in your tyres.
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post #651 of 672 Old 05-16-2019, 05:02 PM Thread Starter
 
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Perhaps. although the post specifically referred to how Hamilton has "always sought out weird lines for more grip."
When it's wet, in general Hamilton - and nowadays most drivers - takes the so-called "karting line", where the pebbles embedded in the asphalt are less polished owing to relative lack of use. As I say, that is pretty normal; Hamilton is just better at it than most of the others.

Saying that, when they were both at McLaren, Jenson Button was known as being slightly better than Hamilton in changing conditions, when you had to judge lap-by-lap when to take the normal line and when to take the karting line (or something else), when to change tyres, and how to control the temperature in your tyres.
Yes. Literally you are correct, but if we take a wider view the discussion started with a Verstappen vs Hamilton who is the better driver question. And as we pointed out they are not competing with identical vehicles so it is not possible to give a definitive answer. But at Spa Vettel et al were 3 seconds off Hamilton's pole setting time which was a spectacular run — so in this bar room discussion fair enough to bring it up to support a Hamilton is best point of view.
I am a fan of Hamilton, Vettel and Verstappen - really enjoy watching them drive/qualify (not so much the F1 endurance part). With no data whatsoever I just feel Verstappen has a reaction time edge — milli seconds perhaps over the old timers!


PS was also thinking that we ignore Bottas in the discussion yet this year he is up there with Hamilton — who is better Bottas vs Verstappen? haha

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post #652 of 672 Old 05-16-2019, 07:25 PM
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Yes. Literally you are correct, but if we take a wider view the discussion started with a Verstappen vs Hamilton who is the better driver question. And as we pointed out they are not competing with identical vehicles so it is not possible to give a definitive answer. But at Spa Vettel et al were 3 seconds off Hamilton's pole setting time which was a spectacular run so in this bar room discussion fair enough to bring it up to support a Hamilton is best point of view.
I am a fan of Hamilton, Vettel and Verstappen - really enjoy watching them drive/qualify (not so much the F1 endurance part). With no data whatsoever I just feel Verstappen has a reaction time edge milli seconds perhaps over the old timers!


PS was also thinking that we ignore Bottas in the discussion yet this year he is up there with Hamilton who is better Bottas vs Verstappen? haha
I am not trying to speak for TougeSpirit, but I thought the issue was not whether Hamilton or Verstappen has more natural ability (which I think we all agree will probably never be settled), but rather whether Hamilton was as creative as Verstappen in finding unorthodox racing lines. TS thought that Hamilton was at least as creative, and gave the example of what Hamilton did in 2018 in the final corner at Spa. He might be right, but I do not see what Hamilton did in that corner that was out of the ordinary.
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post #653 of 672 Old 05-16-2019, 07:40 PM
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Moody's Investors Service
McLaren Finance PLC
McLaren Holdings Limited

Assignment of B2 Ratings

London, 16 May 2019 -- Moody's Investors Service (Moody's) has today changed the outlook to negative from stable for McLaren Holdings Limited (McLaren, company) and McLaren Finance PLC. Concurrently, Moody's has affirmed the B2 corporate family rating (CFR), B2-PD probability of default rating (PDR) of the company and B2 instrument ratings at McLaren Finance PLC.
This is as one might have expected. I think the question - since at least the point when McLaren ditched Honda if not a few years sooner - has been and remains whether, if necessary, the shareholders would be prepared to provide additional funding. I would take some comfort from the fact that Key and Seidl - both of whom would have had attractive options with other teams - committed to McLaren.
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post #654 of 672 Old 05-16-2019, 07:51 PM Thread Starter
 
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This is as one might have expected. I think the question - since at least the point when McLaren ditched Honda if not a few years sooner - has been and remains whether, if necessary, the shareholders would be prepared to provide additional funding. I would take some comfort from the fact that Key and Seidl - both of whom would have had attractive options with other teams - committed to McLaren.
Yes either funding (likely) or cut-back/get out?
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post #655 of 672 Old 05-16-2019, 08:59 PM
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Yes either funding (likely) or cut-back/get out?
I don't see cutting back as a viable option. On a much leaner budget, they would probably have to get out of racing, or at least out of F1 racing. If it becomes obvious that you are cutting back, your best personnel start looking for alternative opportunities at other firms, your suppliers get antsy about payment terms, your dealers lost confidence, all that starts to be figured out by your customers, and it becomes a downward spiral. If they wanted to get out, I still think the way to do that would be by selling out to a larger car-maker.
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post #656 of 672 Old 05-17-2019, 02:16 AM Thread Starter
 
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I don't see cutting back as a viable option. On a much leaner budget, they would probably have to get out of racing, or at least out of F1 racing. If it becomes obvious that you are cutting back, your best personnel start looking for alternative opportunities at other firms, your suppliers get antsy about payment terms, your dealers lost confidence, all that starts to be figured out by your customers, and it becomes a downward spiral. If they wanted to get out, I still think the way to do that would be by selling out to a larger car-maker.
Yes. The car business is doing well but the company is spending heavily on F1 racing. So how about give up F1 (if 2021 doesn't go McLaren's way) and focus on IndyCar and/or Sports Car racing not that I think that McLaren will give up F1, just putting the alternative out there. Normally when selling a company you first make it look healthy financially that gets the highest $
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post #657 of 672 Old 05-17-2019, 02:33 AM Thread Starter
 
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I am not trying to speak for TougeSpirit, but I thought the issue was not whether Hamilton or Verstappen has more natural ability (which I think we all agree will probably never be settled), but rather whether Hamilton was as creative as Verstappen in finding unorthodox racing lines. TS thought that Hamilton was at least as creative, and gave the example of what Hamilton did in 2018 in the final corner at Spa. He might be right, but I do not see what Hamilton did in that corner that was out of the ordinary.
Ok so you were responding to #640 while I was reacting more to TougeSpirit's reply to John Galt #641 which I thought represented a more comprehensive view of what TougeSpirit thinks on the Hamilton vs Verstappen issue.
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post #658 of 672 Old 05-17-2019, 06:34 AM
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Ok so you were responding to #640 while I was reacting more to TougeSpirit's reply to John Galt #641 which I thought represented a more comprehensive view of what TougeSpirit thinks on the Hamilton vs Verstappen issue.
Correct. I said that one could not say which driver was overall "better" (as in, more likely to win a championship if they were in equal equipment), but that Hamilton was the best at conventional techniques whereas Verstappen was more creative. John Galt said that Verstappen was overall better. TougeSpirit replied to John that over a season Hamilton would smash Verstappen and to me that Hamilton was as creative as Verstappen was.
TS seems to be a Hamilton fan.
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post #659 of 672 Old 05-17-2019, 07:08 AM
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Yes. The car business is doing well but the company is spending heavily on F1 racing. So how about give up F1 (if 2021 doesn't go McLaren's way) and focus on IndyCar and/or Sports Car racing not that I think that McLaren will give up F1, just putting the alternative out there. Normally when selling a company you first make it look healthy financially that gets the highest $
Although for some time Zak has been making the predictable noises about McLaren's future in F1 depending on the new formula in 2021, about a week ago he made a comment with a slightly different tone to it. Apropos of Indy and that if the team do well there this year with Alonso they would like to return with a two-car team next year, he also remarked to the effect that it was possible in future that McLaren would be in other racing series instead of F1.

Apart from Indy, it's not clear what other series those would be. In theory WEC/Le Mans would be a natural for a sports car company, but the continuing uncertainty over what the basic concept of new formula will be is problematical. Yesterday was supposed to be the deadline for "hypercar" manufacturers to commit to the proposed new formula but I gather that, at least as of a few days ago, no manufacturer had committed.
The only other obvious option would be Formula E. I personally hope that McLaren won't go near Formula E, which is about as interesting as watching a game of dominoes.
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post #660 of 672 Old 05-17-2019, 12:13 PM Thread Starter
 
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Although for some time Zak has been making the predictable noises about McLaren's future in F1 depending on the new formula in 2021, about a week ago he made a comment with a slightly different tone to it. Apropos of Indy and that if the team do well there this year with Alonso they would like to return with a two-car team next year, he also remarked to the effect that it was possible in future that McLaren would be in other racing series instead of F1.
..
Yes supporting/influencing Casey/Bratches efforts.
And a large part of the McLaren Indy effort is, I assume, to develop McLaren brand awareness/recognition in USA.
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