Outlook: Pit stop for Bernie's grand prix bond

OTHER THAN Bernie Ecclestone himself, everything about Formula One is big. The hype is mighty, the crowds enormous and the TV audiences gigantic. What Mr Ecclestone and the bankers at Morgan Stanley are about to discover is whether the risks attached to buying Formula One's $2bn bond offer are also unacceptably large.

In his eagerness to cash in on the success of Formula One, Mr Ecclestone has drawn unwelcome attention to himself and that has scarcely helped his cause. Until his abortive attempt to float the business no one, including the racing teams themselves, had really focused on what a gold mine Bernie and his wife were sitting on.

The draft prospectus for the bond issue may be sketchy in many respects, including the nature of his contractual relationships with the F1 teams. But it does open a window on to the commercial value of his right to promote the grand prix circuit and sell the television rights. In 1999, for instance, contracted gross revenues of Mr Ecclestone's empire will be $407m (pounds 245m), of which $237m relates to revenues from television.

Unfortunately, the scale of the profits to be had from Formula One has also alerted the attention and interest of the competition authorities and the media. This week's Panorama investigation of Mr Ecclestone's empire has unquestionably left a pall hanging over the bond issue that may be enough to damage investor enthusiasm fatally.

The more serious threat comes from the European Competition Commissioner, Karel Van Miert. He has taken on bigger fish than Mr Ecclestone and fried them - witness British Airways' decision to drop its alliance with American Airlines. So Brussels can't be underestimated.

Mr Van Miert is examining the stranglehold Mr Ecclestone has over Formula One through his exclusive agreement with the sport's governing body, the FIA, to promote it, and his exclusive deals to sell the lucrative television rights. If Mr Van Miert decrees these are anti-competitive, he may want to unravel the arrangements or at least shorten the existing television contracts.

Mr Ecclestone's supporters say it would not matter if the contracts were shortened as he still retains ownership of the sport and therefore the ability to auction the rights to another operator.

Based on the way television revenues have exploded, these rights should be very valuable indeed. However, securitisations such as this one, which matures in 20 years' time, depend on long-term revenue streams to repay the interest and principal. Even if it can eventually be proven that the sums stack up, sentiment may be against him.