George Gillett’s financial difficulty following the sale of Liverpool FC has thrown the future of Richard Petty Motorsports into doubt and left the NASCAR team’s owners and lenders searching for investors to keep the team afloat.
The Gilletts and Pettys, which are two of the NASCAR team’s principal owners, began an aggressive search for investors this month. RPM has hired the Gordian Group, a New York-based investment bank, to assist them in their search, while the syndicate of banks that lent Gillett more than $90 million to buy the team have been working with FTI Consulting, a global consultancy specializing in corporate finance, to find investors, sources said.
A spokeswoman for RPM declined to comment.
The search for funding for RPM follows a challenging financial year for Gillett. The team reportedly defaulted on its roughly $90 million loan last February, and Gillett, who owns as much as 70 percent of the team, has been unable to restructure it.
Gillett was counting on the sale of his stake in Liverpool FC to assist him in funding the NASCAR team. But Liverpool sold two weeks ago for $475 million, a sum far less than Gillett and co-owner Tom Hicks expected and one that has put a heavy strain on Gillett’s liquidity.
Bankers met with Gillett last week regarding RPM. Wachovia and CIT, which lead a syndicate of about a dozen financial institutions that issued the loan, didn’t respond to requests for comment.
The banks reportedly offered Gillett a chance to buy out the loan for $35 million last summer, but he declined to do so, according to sources. It is unclear what the banks would accept from a buyer or investor interested in RPM.
In addition to owing the banks money, Gillett also owes Ray Evernham at least $20 million and Roush Fenway Racing several million dollars, sources said. Evernham founded the team in 2000 and sold it to Gillett in 2007 for more than $100 million. He retained as much as a 16 percent ownership stake in the organization.
The team was renamed Richard Petty Motorsports in 2009 after Gillett formed a partnership with Petty that gave the NASCAR great a roughly 4 percent stake in the team. The partnership followed the closure of Petty Enterprises.
Roush Fenway Racing began building engines for RPM after RPM merged with Yates Racing last year and switched from Dodge to Ford cars this season. Without RPM, Roush Fenway would lose one of the buyers and testers of its engines, and Ford would drop from representing two Sprint Cup teams—Roush Fenway and RPM—to one.
Evernham didn’t return calls seeking comment. Roush Fenway Racing representatives referred inquiries to RPM.
RPM, which employs approximately 240 people, down from about 300 when Gillett bought the team, was current as of last week on all of its obligations to its drivers and employees. The team has managed to stay current despite losing the support of Chrysler, which was one of the team’s major underwriters when it ran Dodge cars.
No drivers for RPM made the Chase for the NASCAR Sprint Cup this year, and its premier driver, Kasey Kahne, left the team last week with five races left in the season. His No. 9 car is sponsored by Budweiser, which is leaving RPM for Richard Childress Racing next year.
RPM plans to run two cars next season after running four this year.
Only one of the 2011 cars, the No. 9 Stanley Tools Ford to be driven by Marcos Ambrose, is sponsored. The team remains in negotiations with Best Buy about extending its sponsorship of the No. 43 car driven by AJ Allmendinger.
Best Buy’s previous sponsorship was worth approximately $6 million a year, which is well below the $15 million to $25 million top teams command for primary car sponsorships, sources said.
RPM is the last sports property Gillett owns. He sold his 80 percent stake in the Montreal Canadiens in the summer of 2009 for a reported $550 million and sold Liverpool FC for $475 million earlier this month.
Gillett’s financial struggles coincide with the recession and the credit crunch that followed. He bought both RPM and Liverpool at the height of the market in 2007 and financed the acquisitions with debt.
As banks became less willing to extend or restructure loans in late 2008, his ownership of the teams was tested. Gillett and Hicks eventually were forced to sell Liverpool FC by the primary lender, Royal Bank of Scotland, and the sale added to the pressure Gillett faced at RPM.
Tripp Mickle is a reporter with SportsBusiness Journal.
