Outlook: Bernie's bond

THE EUROPEAN Commission's provisional ruling that the way in which Formula One television rights are controlled is in breach of EU competition law can hardly have come as a surprise to Bernie Ecclestone, or anyone else for that matter.

Bernie has been lapping the circuit with the Competition Commissioner Karel Van Miert long enough to know that he would almost certainly be disqualified well before he reached the chequered flag. Judging by yesterday's statement from his Formula One Administration, Bernie's main grievance seems to be that the press got wind of the ruling before the company or its lawyers, in which case he has still got an awful lot to learn about the way Brussels works.

It is hard to know whether the ruling casts further doubt on his hopes of floating Formula One, since these were already wafer thin anyway. Likewise it is fruitless attempting to assess the impact on his $1.4bn Bernie bond, which was finally rolled out in slimmed down form in May as an alternative to flotation.

It remains a minor miracle that Bernie's bond ever got off the starting grid in the first place. But since it is not yet listed on that well known market, the Luxembourg Stock Exchange, there is no price to go down. The assumption is that the vast bulk of the bond remains in the hands of its two sponsors, Westdeutsche Landesbank and Morgan Stanley, and a handful of their unfortunate institutional clients.

Should the Commission force Bernie to release his stranglehold over the sport and allow other companies to bid for the television rights (a process which, incidentally, could take years), the bond holders would not have a leg to stand on. But then they can hardly say they were not warned in advance that the Bernie bond had more than the usual number of strings attached. The problem comes in five years' time when the coupon starts to ratchet up with the speed of a Mika Hakkinen leaving the pit lane.

Bernie had assumed that the bond would be redeemed long before that with the proceeds of flotation. Given that flotation is now rather unlikely, Mr Ecclestone will be faced with having to pay a rapidly escalating coupon from revenue sources under increasing threat.

If nothing else, Bernie is a consumate dealmaker and he must sense there is a way of brokering an agreement with the Commission. He could threaten to take the Grand Prix series out of Europe but that risks losing a huge audience and the accompanying revenues.

Those who know Bernie from old reckon he is limbering up to sell out altogether, either to a media magnate or one of the motor manufacturers who are now taking a much more direct stake in the sport.

They also note with interest the way Mr Ecclestone is buying up Grand Prix circuits around Europe like there is no tomorrow. Perhaps he is anticipating the day when the stranglehold exerted by his Formula One Management is broken and the circuits themselves promote the races and auction the television rights.