Exclusive: The inside story of Caterham’s collapse in Formula 1
Former Caterham boss Finbarr O’Connell has revealed how the final days of the team played out, after taking over as team boss for their final race.
In the first of a two-part interview, the one-off Formula 1 team boss Finbarr O’Connell has explained how the demise of the Caterham squad in 2014 led to him being catapulted into the limelight at the Abu Dhabi Grand Prix that year.
While Eddie Jordan is the most well-known Irish personality in Formula 1, very few will remember that Ireland has been represented by a far more recent team boss as O’Connell took over from Manfredi Ravetto as the Team Principal for the Caterham F1 team for the season finale in 2014.
With the race being largely forgettable for the backmarkers, it was the final nail in the coffin after four years of off-track drama for the Leafield-based team.
O’Connell, whose day job is as an administrator for London and Dublin-based Smith & Williamson, granted a no-holds-barred interview to explain the dramatic and downright confusing circumstances that led to the demise of the team after months of turmoil.
Surprisingly, O’Connell wasn’t much of a Formula 1 fan prior to taking over at the helm of a team.
“It was never a sport I was hugely enthusiastic about,” he laughed as we began our chat.
“If it was on TV, I’d probably turn on something else! I find it goes on for so long and can be processional but, having been the Team Principal of an F1 team, I’d be much more interested nowadays. I still don’t watch the races. But I have a real interest in the finances, the business side, and the intrigue of it, having been in the centre of it all.”
Having said that, O’Connell had done some prior restructuring work in F1, and the motor racing world generally, before being called in to get involved with Caterham.
A bit of backstory is required here in order to understand how a London and Dublin-based accountant suddenly found himself in charge at Caterham.
Caterham evolves from the former Lotus entry
Having been a reasonably solid, albeit scoreless, performer throughout its first two years of racing, under the Lotus name in 2010 & 2011, the F1 team was renamed Caterham for 2012 as team owner Tony Fernandes acquired the Caterham Cars company.
As most racing enthusiasts will know, Caterham Cars is a British manufacturer of specialist lightweight sports cars established in Caterham, Surrey, with their headquarters in Crawley, Sussex.
The Caterham 7, originally launched in 1973, is a direct evolution of the Series 3 Lotus Seven designed by Colin Chapman. That Lotus name was to have important consequences for the Formula 1 team.
Fernandes, a Malaysian businessman who is the founder and CEO of the AirAsia airline, established the Caterham Group, which included Caterham Cars and his F1 team, in late 2011.
A very public licencing argument with Lotus over the naming rights of the team resulted in Fernandes renaming his F1 team Caterham F1, and a general tidying up of his two entities under the one umbrella.
The manufacturer of the Caterham F1 cars, Caterham Sports Ltd (‘CSL’), supplied the race cars to 1MRT, Fernandes’ Malaysian company which operated the Caterham F1 team. CSL was also responsible for the design and maintenance of the F1 race cars.
By 2014, Fernandes’ patience with a failure to progress in F1 was wearing thin. Coupled with his increasing involvement with football team Queens Park Rangers, Fernandes wanted a way out of F1. With regards to his football interests, Fernandes bought the whole of Bernie Ecclestone’s 66% stake in Queens Park Rangers for a reported £35m.
In early 2014, with Caterham’s new CT05 being the slowest car on the grid, Fernandes sold his F1 team (ie. 1MRT) to a group of faceless Swiss and Middle Eastern investors who operated through a mysterious entity called Engavest SA. There is much speculation as to who might have really been behind that entity, but that will undoubtedly be the subject of a future exposé.
Former HRT & Jordan/Spyker/Midland boss Colin Kolles took on a senior advisory/controlling role with the team, while former race driver Christijan Albers, as well as Manfredi Ravetto, looked after the team on a day-to-day basis, with Ravetto being the Team Principal.
Caterham enters deep financial trouble
However, behind the scenes, bills were going unpaid at CSL and, in October 2014, bailiffs entered the team’s headquarters at Leafield and seized assets like a test car, pit equipment, and steering wheels.
With debts of up to £15 million owed to suppliers, it was at this point that restructuring professionals from accountancy firm Smith & Williamson (‘S&W’) were appointed by the UK courts to become administrators for CSL and began seeing if a recovery plan could be put into action for the now-Engavest owned Caterham F1 team (1MRT).
O’Connell, a mild-mannered Irishman hailing from County Leitrim, headed up the administration process. He explained that the F1 team was an asset the administrators viewed as worth trying to find a new buyer for.
One of the other administrators from S&W was Henry Shinners, another Irishman from County Clare and, with two emerald green (or perhaps shimmering shamrock!) coloured cars to race, they thought ‘what could possibly go wrong?’
“I was originally appointed administrator over the company that manufactured the cars (CSL), as they were two different companies,” said O’Connell, recalling the time period when he took over as boss of CSL.
“The racing team (1MRT) was still trying to get itself sorted and get up and running. There was a separation where the assets were in one place, essentially the team, including all of the employees, in 1MRT, while the liabilities were in a separate company, CSL.
“Then it became clear the racing team wasn’t going to get racing under its own steam and so it was decided I should get involved, and I effectively took over as administrator of 1MRT and as Team Principal of the F1 team.
“I spoke to the mechanics and the people involved in organising the racing side to see if I could get their backing. There was a big upside for them: If we managed to race and sell the team, then all of them could hopefully have a good chance of continuing to work there.
“The general view, pre-Engavest, was that Tony Fernandes was not winning races and not getting any prize money and so the team was surviving on sponsorship.
Press reports were saying that there was sponsorship coming in from the airline world but Fernandes was having to plug a very substantial gap every year and he came to a point where he wanted to get out.
“We were appointed to oversee CSL in the first instance as the F1 car manufacturer, which was a UK registered company, and then 1MRT, the Malaysian company, and we were appointed administrator of it in the UK as an unregistered UK company.
“Even though it’s a foreign company, it effectively traded in the UK so English courts have the right to appoint administrators if its centre of main interests, or ‘COMI’, is in the UK. The view was that, when I was appointed to CSL, 1MRT would continue and sort out its issues but that wasn’t happening.”
Arguments over who owned the Caterham F1 team
The muddying of the waters regarding the ownership of the F1 team, with the transferral of shares from Fernandes to Engavest reportedly never being finalised, meant that O’Connell was left without a clear picture as to who the actual owner was.
A statement from Engavest in late October said: “The seller [Fernandes] has refused to comply with its legal obligations to transfer their shares to the Buyer [Engavest]. The Buyer has been left in the invidious position of funding the team without having legal title to the team it had bought.
“This is in total contradiction to the Seller’s press release of 3 October 2014 which stated that Mr. Fernandes and his Caterham Group had no longer any connection with the Caterham F1 Team.”
It was at this time that Fernandes took to Twitter and said: “If you buy something you should pay for it. Quite simple.”
A statement issued on behalf of Fernandes and the Caterham Group, of which he is co-chairman, read: “We agreed in good faith to sell the shares on the basis that Engavest undertook to pay all of the existing and future creditors, including the staff. Sadly Engavest has failed to comply with any of the conditions in the agreement and Caterham Sports Ltd (the UK operating company of the F1 team) has had to be put into administration by the bank, with large sums owing to numerous creditors.
“If you agree to buy a business, you must pay its bills. They have breached that promise and now, sadly, it is others such as the employees and the fans of the Caterham F1 team that will suffer if the team ceases to race. I sincerely hope this will not be the case and a solution can be found.”
The story quickly became even more bizarre. During the time in which Kolles was in charge, representing Engavest, a chain of events led to the factory janitor becoming the main shareholder in CSL.
Constantin Cojocaru, a former Romanian footballer, was approached by Ravetto, who said that he recognised him from his football career, and elevated his position to being the owner and the director of CSL. The shares were transferred to him by 1MRT.
“Tony Fernandes stepped out and Colin Kolles took over to run the team,” explained O’Connell.
“When that ran out of steam… Colin Kolles must have been looking for a substantial backer and, when he didn’t have that, he didn’t have the money to go forward. That’s when Mr. Cojocaru became the owner and sole director of CSL. He had been the janitor of the company beforehand and described being brought down to London, signing some papers and suddenly he owned all the shares in the company. It moved from Tony Fernandes’ interests over to him, but I can’t remember if Engavest ever took over legal ownership in between.
“Engavest was linked with Colin Kolles and not with Cojocaru. If you wanted to use the word patsy, he was the person left holding the baby. He signed documents in English, a language he didn’t really speak. He definitely wasn’t capable of reading the documents.”
However, O’Connell’s own dealings with Colin Kolles were limited as the businessman seemingly wanted nothing to do with the administration process: “He didn’t want any dealings with me. Normally, when we’re appointed over a company, the previous managers spend a lot of time with you, helping you get your feet under the desk and understand the situation and maximise the funds for the creditors.
“But there was none of that. When I refused, as administrator of CSL, to supply 1MRT with equipment and services at substantially under cost, Colin Kolles effectively walked away and brushed his hands of the situation and hoped I wasn’t going to take any action against him.”
As for why Kolles might not want to have engaged with him, O’Connell said: “A number of reasons. The big thing was that Caterham, owned by Tony Fernandes and all of the parties trading with it like Pirelli (for tyres) & Red Bull, for gearboxes… all of those saw a multi-billionaire behind it and had confidence that they would be paid. Once Fernandes stepped back and the Colin Kolles and Cojocaru era began, it was a complete nightmare for suppliers because… where’s the financial backing that’s going to be paying them? Who provides the cash flow? Are the sponsors going to continue sponsoring the team? If Kolles had stayed involved, he would have been blamed by the suppliers for non-payment of their bills.”
Finbarr O’Connell enters Leafield to find a troubled F1 team
Walking into the factory of Leafield in the wake of the bailiff’s visit, O’Connell explained what he found.
“I mean there weren’t tumbleweeds blowing through but, figuratively, there were,” he said.
“It was empty, people hadn’t been paid, there was no positive activity at all and the vultures were flying around, picking up what bits they could. So, I suppose one good thing was that because the team had been down in South America on the last race it took part in, the team and the kit, the machinery – not the people – were actually all altogether, down in South America, so they weren’t in Leafield to be nabbed by anybody. I was later able to organise that the kit got shipped from South America over to Abu Dhabi.”
O’Connell decided that the best way to try securing the future of the Caterham team was to participate in the season finale in Abu Dhabi. But funding meant that was going to be an issue, and it was only after talking to members of the team that he started to realise just how important the racing meant to the staff.
“We weren’t getting any dialogue from Colin Kolles or any of the people who were in charge. We feared that we might get appointed to the racing team and just be selling off the cars as collector’s items or for the parts.
“So, when I got to meet the Caterham F1 team leaders and all the various people who were effectively involved in running the actual ‘nuts and bolts’ of the team, and just realising what sort of people they were… they were people who have got F1 fuel in their veins. That is what they lived for, that is what they loved in life… and it became clear to me that, if I got some funding, I could get the team to Abu Dhabi and that was the best way to showcase the team, and hopefully sell the team.
“There’s a simple equation really and it is that if you’re a multi-billionaire and say ‘I’m going to have an F1 team and I’m going to start it from scratch’ – it’s going to take you 2 years, and probably $100m (even before F1’s $200m entry cost). Here, we had a viable F1 team, which had a Red Bull gearbox and Renault engine and a quality engineering and pit team – I could be racing next season and it’s going to cost me $20m, maybe $25m.
“The objective was always to save the team as a going concern, because it was probably worth 10x (at least), maybe 20x the break-up value if it was sold as a going concern. And that means handing over to somebody a racing team that can race.
”I would have had to restructure the company; normally administrators don’t restructure the company, we just sell businesses out of companies but because of the F1 license, the membership of the Concorde Agreement – the ultimate document – that would have been fine.”
Rallying the troops to race in Abu Dhabi
Caterham famously did some crowdfunding ahead of the Abu Dhabi weekend, with lead driver Kamui Kobayashi helping with the push to raise the money required to go racing that weekend.
This was one of the first times that crowdfunding had been used in a restructuring scenario and O’Connell admitted he was very proud that the team and himself were thought leaders and pathfinders in this area of funding.
But, even aside from the crowdfunding, O’Connell had to negotiate deals with the team’s existing suppliers to ensure that they’d have everything they needed for the weekend.
“We had to get all the suppliers we needed to commit to actually support us, so effectively Red Bull… because these people were already owed a very substantial amount of money. But then to allow us to use the gearboxes, Pirelli for the tyres… Actually, we had to pay for (every drop of) our oil at full price, and we had a lot of support from Renault on using the engines as well. Renault, Red Bull, and Pirelli were brilliant supporters of our efforts to showcase the team in Abu Dhabi and to, hopefully, sell it to a financially strong operator.”
With the crowdfunding drive raising around £250,000, Finnbarr was doubtful whether the team could have raced without that generosity shown by the public: ‘The tank was completely dry and, I think, I paid 2000 GBP in expenses to all the members of the team who went and then there are all the various hotel costs and flights and everything else. I think, in simple terms, the answer is ‘No’, because we had to raise the money very quickly, and we wouldn’t have been given any credit to do it.”
O’Connell explained that he had to raise a seven-figure sum, on top of the crowdfunding money, to be able to afford to go racing in the administrator’s efforts to showcase and sell the F1 team.
Bernie Ecclestone, then the ringmaster of F1, also intervened in the case of a supplier not wanting to help the team out: “There were, in some cases, some discussions, but this is where Bernie came in very handy in that he didn’t like the fact he had 2 insolvent teams on the grid, Marussia and ourselves, but, if we were going to put 2 cars on to the track and compete, that’s what he wanted. So he did everything he could to help me get the cars going.”
A concerning storyline from the tail end of 2014 was regarding the safety of the Caterham cars, with rumours suggesting that maintenance wasn’t stringent after Kamui Kobayashi had raised doubts about the quality of the equipment he was driving. But O’Connell denied that he saw any evidence of corners being cut to the detriment of the standard of the machinery.
“Absolutely not!” he said. “But the processes and the analysis going on – the examinations of the chassis and all the equipment in the different teams – it was just clearly happening completely differently. I mean Mercedes is probably the pinnacle of that, where every single part is analysed and reanalysed and reanalysed… They put electric currents, as did we, through some of the parts, I mean, simple things like that which actually helps you spot any invisible fractures in the metal and that’s just at a simplistic level, but there are highly sophisticated ways to spot things.
“That is one of the dangers of teams being run on a complete shoestring budget… the engineers and the mechanics were absolute quality and these people, you know, they could be working for Caterham one year and then Mercedes the next. They’re all at the top of their field. So it is absolutely nothing to do with the personnel we had, it was just the money. Just the funds and the processes and the procedures…”
Finbarr informed me that, during the Grand Prix itself, whilst he sat on the pit wall, it became clear that there were substantial vibrations in Kobayashi’s car, and whilst Kobayashi wanted to continue to race, the advice of the racing team was that he should be called in.
Out of his concern for safety, O’Connell made the decision to bring Kobayashi in to retire. He recalled that, when he addressed the full racing team over their headphones in the pit before the race, having thanked them for their Herculean efforts in getting the team there, he had made it clear his ambition was to have a safe race and to showcase the team in the best possible light to find a buyer.
This interview was originally published by FormulaSpy, and has been reproduced in collaboration.