Sorry to spam-attack this thread with posts... but in regards to the above... For those unfamiliar with Letters of Credit... it's not what it sounds like. It sounds like a bank just giving a letter to a vendor saying "don't worry, this guy's credit is good" - but it's much more. It's essentially an irrevocable guarantee of payment. Once the terms of the LOC are filled, the payment is automatically made from the bank to the vendor. Think of it like a money order, but for a lot of money. Susan Combs has already said the $25MM won't be paid until the race date. She can't politically waver from this position. Bernie has apparently cancelled the contract with Tavo and is open to making one with COTA, maybe at a higher price, maybe not. Bernie is not going to be the one risking getting paid (or not) by the state. He wants paid up front, period. I would too. So I imagine he's telling COTA that he needs to know, with 100% certainty, that he is going to get paid. So he wants this in the form of a letter of credit. I am sure Bernie wants the LOC to cover the full 10-year contract. So if Epstein goes to his bank and asks them to write him a LOC covering $25MM paid per year to FOM on such-and-such date, contingent upon F1 coming to put on the show... well, Epstein's bank is going to say "Sure, no problem... we'll just deduct $250MM from your account and keep it in escrow". Epstein just went from not having to pay the $25MM at all, to having to essentially pay it all up front. That's fatal to his business plan. There are four ways I see this could get resolved. 1) Epstein convinces Bernie to wait for payment from Texas post-race. The chances of Bernie accepting this are between 0% and.... 0%. 2) Epstein convinces his bank to write the LOC without him paying up front - maybe using the circuit as collateral or something. But if there was $250MM of collateral in the circuit, they would already have used it to fund construction. Epstein wouldn't leave $250MM of equity hanging out there. 3) Epstein convinces Combs to re-instate the early payment to FOM, and hopes Bernie accepts this. But with Combs backing off and saying no money up front, I don't see how she can do this politically. And Bernie won't accept it because he'll be gun shy that they will put the rug out. He wants guaranteed funds. Epstein could try to convince the bank to use the Texas money as part guarantee on the LOC, but they will want guaranteed funds too, and the bank won't be that dumb. 4) Epstein finds the money to cover the LOC himself (or through his investors). This would essentially almost double the cost of the whole project. He's had a hard enough time finding investors so far - how is he going to get double the cashish for this? The ball is entirely in Epstein's court. And it looks like it's heading for his groin at 100mph right about now. I don't blame Bernie one bit... he has Jersey in his pocket. It's what I said right in the beginning, IMO. Bernie gave a contract to Tavo to placate the teams. If Tavo had pulled it off, Bernie was happy to go to Texas and have a race there. But he wasn't going to fund it either directly or indirectly through accepting delayed payments. But the Tavo deal gave him leverage elsewhere and allowed him to tell FOTA they were working on coming to the USA. I thought Bernie was trapped between a rock and a hard place and would be forced to negotiate with Indy. Boy was I wrong - I underestimated the dwarf again. I'd hate to be on the other side of any negotiating table with him. He is a true master deal maker.
Thank you... SRT Mike, for all the GREAT conjecture and 'what if" plot lines, your numbers are WAY off on the 'total revenue" vs. "total cost" of the ONE event. It's not just "ticket sales" of the gate, that make the promoter whole. Have you ever been to one of these events? Concessions, food, VIP tents, commerative trinkets to take home, hotel and travel. A $175 face value ticket at Indy represents about $3K PER PERSON into the local economy. I beat that by sleeping in a tent but the F1 races at Indy NO ONE was camping and hotels filled up in three contiguous states! The other thing to recall is the amortization of the Track Cost into a ten year F1 Contract duration, and also the other events to be hosted, Moto GP etc., so the Track isn't some white elephant gatherng dust 364 days a year. I could make all these numbers work on a cocktail napkin....
It looks like Tavo is done, a shame but he couldn't pay the $25M/per year when he OBTAINED the agreement, so if he upset the investors he cut his own throat.
Don't worry, I had an interesting meeting this morning at UofH, concerning "The Tool". Cannot say more right now....
A Realtor agreement for services is for a fixed period and "times out" at completion of time. As did Tavo's to fund Bernie's licensing fee. Hugely bad move for him not to merge into the COTA operations staff, as I suggested three pages back. Lack of experience in such matters I suppose.
I'm a 20.5%'r who wanted to see the race happen but expected this. No ones willing to budge (nor do I blame them) and with no contract in place at all (since Bernie cancelled the contract on Tavo) it's done. Unless someone comes up with 250MM in 3 weeks it's over.... Let's go to Jersey boys...they seem to want a race there...
I don't see "Track Naming Rights" on you balance sheet anywhere Mike. I know everyone HERE sees these numbers being tossed around as 'big money"....(and to us, they are!) But you need to recall that in Texas there's business enterprises that can send a $100M ship, (and eleven bodies) to the floor of the Gulf, and absorb it as "expense". So, to crow all this is "done" may be underestimating the total worth of the players involved. For sure no one wants to "lose money to entertain Bernie", but they have already commited to the track contracts and construction, with infrastructure. They'll pay that cost even if it turns out to be an amusement park.
Naming rights only tend to get sold when the venue is complete and people have been there No one will pay big money to sponser the Formula-one-austin-texas-offroad-circuit-of-the-americas-that-only-David-Coulthard-can-drive-on... xP
The not yet built football stadium in Los Angeles for a team we don't even have, has sold the naming rights. It's Farmers field, and they paid $700MM for it.
The future of a healthy business was at stake in your example. COTA monies, if there are to be some 'invested', are more of a crapshoot. These guys didn't get rich playing craps.
But the economic benefit you are talking about is general, not to the track. So the person may drop $3k coming into town, but only a very small portion of that is making it's way into the hands of the track owners, and without the state money, doesn't help Epstein to pay Bernie's fee.
According to Bernie, Tavo was in breach and that's why his agreement was terminated. Nobody knows the specifics of that - I am sure Epstein was aware of Tavo's contract and possibly knew that if he left Tavo hanging, Tavo would be unable to pay Bernie's fee and he would be next in line. That may have even been arranged with Bernie. It's not a sure thing that Tavo didn't want to integrate with COTA - maybe he did he and they wanted to let his contract expire?
You really think that 100K people have a 3K impact EACH?? Sure a few thousand will fly in from Yurrop and party downtown, but the rest, as in Indy drive in for the day or camp in Boss Hogs field next door for the weekend. Even at the inaugral race I doubt that 20% were from furrin parts. And how much revenue do you think a PCA event brings in? As to naming rights, I am sure that the Speedway here could ask any amount for someone, they chose not to, but place was paid for 50 years ago. they are totally independent, self insured, fully funded. Back in the good ol days, the rumour was that the week leading up to and the weekend of first qualifying covered the total annual budget. If the Grand Prix could work, it would still be here.
My son and I attended the USGPs '01 thru '07. Here's what was bugeted back in '07...and if I remember spent more... not 3K each...but we stimulated the economies in several states!! What at freaking great time, Oil Cans of Foster's sitting on the grassy berms watching, hearing, feeling and smelling the most amazing cars on earth ...was hoping to do it again. Se'la'vie! hotel room 1034.00 2 Fri/Sat pass 50.00 parking 50.00 2 gen adm tickets 170.00 box lunches 27.90 dinners five nights 350.00 lunches 180.00 oil cans of fosters 240.00 room booze 35.00 1000+ miles fuel 270.00 souvenirs 200.00 misc 200.00 2806.90
For the past year we've been hearing about how money is no problem for Texas, and there are plenty of guys who can stroke a check big enough for the whole thing. Except reality proves that not to be the case. Remember, it's *always* about money, even when it's about something else, it's still about money. If there were so many guys ready and able to stroke that check, none of this would be happening. I think the ROI just isn't there anymore, not when you factor in track construction costs and the loss of the $25MM from the state.
The $25M (per annum) from the State isn't "lost"...but you are correct it's a far sight more difficult now than when they were all smoozing in Europe. *shrugs shoulders* I suppose you are assuming it would not be granted, once the New Jersey race came to fruition??
The number is probably a bit high... when I went to Montreal with my brother, we spent $200/night on a hotel @ 4 nights. Probably dropped $200/day on meals at the track and off-track for another $800. We each spent $350+ on stuff at the track (hats/shirts, etc)... and a few hundie in total for other stuff (brother lost camera battery and bought another, toiletries, etc). The money spent at the track largely goes to the teams AFAIK? And I wouldn't count the money spent on plane tickets or car travel, since that doesn't go to the local economy if you are driving in from out of town. I spent quite a bit more in Milan and Spa, but we were also tourists, so we rented bikes and rode around, took some excursions, etc. That's one area that Austin is going to suffer from compared to NYC. Hate to sound like constantly bashing Texas, but Austin isn't the destination NYC is for tourists, especially well-heeled ones. Given the choice, I don't see many electing to spend a lot of $$$ to come to the USA GP @ Austin, when they could go to NYC instead.
You ARE constantly bashing Texas....LOL! But it's okay....really. We're pretty tough down here.. Did you see the 1008' Carnival Magic crammed into Port Galveston this weekend? I TOLD them all it would fit!! Big Shrimp Boil with the Port Pilots tonight...
What I mean is that it's lost in terms of the balance sheet... or rather, it appeared. Before, it was not something Epstein had to pay for. Now, it is. Because Bernie has said he requires up front payment and Combs says she won't pay up front. Immovable object and unstoppable force and all that The only buffer to satisfy both demands is Epstein, which means he has to come up with it, either personally or through connections. Now, he may get it back in the future... but he may also not get it back. If you had $250MM to loan Epstein to cover the sanctioning fee, would you give it to him, even if he promised to pay you an extra $25MM over 10 years as interest? I wouldn't... I wouldn't trust that I'd get it back. Combs could yank the state money after 1 year and you'd be SOL. Aside from the turdbomb that exploded and covered Combs, there is the NJ race and Bernie's bribery admission. I think that $25MM/year is less of a sure thing than ever before. Not to mention we don't know what terms Epstein is objecting to. Could be Bernie raised the price... or it could be just what we know to be true - Bernie wants guaranteed funds and the state will only pay on a year-by-year basis after the event. If it's a case of Bernie having jacked up the price, it's not just access to the funds, but the quantity of funds that becomes an issue.
If anything, not putting up the money in advance allows them to apply for the money through the Events Trust fund, instead of the METF. The race would qualify under that without any of the questions currently being brought up about other races...
