Hungarian MotoGP Round Uncertain After Bank Withdraws Loan

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The future of the Balatonring circuit near Hungary's Lake Balaton is once again uncertain, after the Hungarian Development Bank MFB refused to underwrite a loan needed for completion of the project, according to the Hungarian business news service MTI-ECO. The loan of 15.3 billion Hungarian Forints HUF (around 57.6 million Euros or 79.3 million dollars) was part of a total package of of over 35 billion HUF in government subsidy needed to complete the 40 billion HUF project.

The MFB refused to underwrite the loan after undertaking a due diligence process. Under the terms of the loan, the state would be providing 70% of the financing of the project, while receiving a 30% stake in the Balatonring circuit. Due diligence revealed that no calculations had been done on the return on investment of the project, making it impossible to judge the value of investing in construction of the circuit. A statement issued by the MFB said that the bank had negotiated with investor about the business risks, but that the investor could not accept the conditions which the MFB had put on the loan.

According to MTI-ECO, the Hungarian government is still committed to the construction of the Balatonring circuit. However, the government were now only prepared to fund the MotoGP round itself, leaving the construction firm - Savoly Motorcentrum Fejleszto - to find other sources of finance for the construction work involved.

That may in itself prove a problem. The project has been surrounded by controversy from the start, starting as a collaboration between the Spanish construction company Sedesa and a Hungarian regional development agency, right before the global economic crisis plunged the Spanish construction industry into meltdown and caused the Hungarian Forint to plummet in value. Initial financing delays meant that the race initially scheduled for last year had to be canceled, and the inaugural race there moved up to September 2010.

The project then seemed to be making headway until earlier this month, when the anti-corruption organization Transparency International and the Hungarian Civil Liberties Union called for the project to be halted over concerns over the lack of oversight of public funds. The head of Grupo Milton Management Zrt, the company responsible for managing the project, was convicted of corruption charges in 1995, and the feasibility study of the project had not only not been published, but journalists were refused access to the study, despite making applications under Hungary's freedom of information act.

The accusations appear to be what precipitated the MFB withdrawing support for the project, after a leaked memo showed that the heads of Hungary's finance department opposed funding of the Balatonring circuit. The atmosphere surrounding the project even caused Tamas Suchman, the head of the Balatonring Development Agency, to resign on Thursday. "I do not want to participate in such a project where every kind of accusation has been started, from blackmail to the uncertainty of recouping the investment," Hungarian business website RealDeal.hu reports Suchman as saying.

Whether or not the Balatonring circuit is completed by September, at least the MotoGP calendar will not lose a race. The Motorland Aragon circuit has been nominated as a reserve for the season, ready to take the place of the Hungarian GP should it be canceled. That would give Spain a total of four races held on its territory, but given the spectacular nature of the track close to Alcañiz in the Aragon region, this would most likely be welcomed by both fans and riders.

The future of the Balatonring circuit near Hungary's Lake Balaton is once again uncertain, after the Hungarian Development Bank MFB refused to underwrite a loan needed for completion of the project, according to the Hungarian business news service MTI-ECO. The loan of 15.3 billion Hungarian Forints HUF (around 57.6 million Euros or 79.3 million dollars) was part of a total package of of over 35 billion HUF in government subsidy needed to complete the 40 billion HUF project.The MFB refused to underwrite the loan after undertaking a due diligence process. Under the terms of the loan, the state would be providing 70% of the financing of the project, while receiving a 30% stake in the Balatonring circuit. Due diligence revealed that no calculations had been done on the return on investment of the project, making it impossible to judge the value of investing in construction of the circuit. A statement issued by the MFB said that the bank had negotiated with investor about the business risks, but that the investor could not accept the conditions which the MFB had put on the loan.

Comments

Just race at Aragon. At this

Just race at Aragon. At this point, the organizers of the Hungarian track look completely incompetent. Dorna needs to save face and move the round to Aragon out of principle.

Total votes: 26

Anything but saving face

I truly think that adding a 4th Spanish round would do anything but save face for Dorna. Adding another race to an already crowded calendar is pushing it. a 4th round in Spain (I know I know, it's an autonomous region and there's linguistic differences and stuff but still.) is reeeeaaaaaallly pushing it.

Spain already has 3, the US already has 2, Italy has 2. But there's no room on the calendar for Turkey? no room for a race anywhere in Africa south of the Gulf? no room for any race anywhere in South America? Is this truly a world championship?

Total votes: 32

Go where the fans are

Why are there so many races in Spain? Because all three of the Spanish rounds have over 100,000 fans turn up there. Adding a fourth will be unlikely to put much of a dent in those crowds, and produce the same kind of attendance.

I don't think that the Motorland Aragon circuit is meant as a permanent inclusion to the calendar, just as an insurance policy against a race being canceled. Which was a good decision, it turns out. I would expect another race to replace Hungary next year, though the question of where that race will be is another matter. I don't think a fourth Spanish GP is likely, though a third Italian round could be possible.

As for other circuits, there's the question of cost. Turkey is now owned in part by Bernie Ecclestone, who has put the price of staging a race up hugely, making it too expensive. As for other circuits, it's largely a matter of cost. While everyone is talking about cutting costs, they can't afford to add in a flyaway, which would place a huge strain on team budgets. The Moto2 and 125 bikes already skip Laguna, just because the teams can't afford the costs of a California round.

Then there's the safety issue. The most logical place for  a MotoGP race would be Indonesia - the country with the world's largest MotoGP fan base. But there isn't a circuit which is up to FIM safety standards. South American faces similar problems, which leaves only South Africa or the Gulf. Plenty of money in the Gulf, but no fans, and South Africa is also starting to feel the pinch - this year's Kyalami round of WSBK is likely to be the last for a while, over financial problems for the circuit.

In short, Spain and Italy are the safest of safe bets for motorcycle racing. And until big money starts to pour into MotoGP, that's not going to change.

Total votes: 31

125 & Moto2 at Laguna

Is it really financial reasons why 125 and Moto2 teams don't come to Laguna for the GP? If that were true then surely they wouldn't bother with the trip to Asia and Australia (which I believe would be more expensive). I was always under the impression that the 125 & Moto2 teams were never "invited" to Laguna per se. It always seemed to me that Laguna GP was an "added" event to the AMA racing. I'm not sure the complete history behind the event, but the AMA always seemed to show their presence during that weekend, thus not leaving room for the GP support classes. I have never heard an official response to the question of why the support classes have not attended and also why they still continue to not attend even in the light of the AMA and its problems as of late. I to this day have not attended a GP event at Laguna due to it not being a full GP weekend of racing classes. The fact that the full GP line up has been at Indy for the past 2 years simply makes the issue even more confusing.

Total votes: 30

money, influence, inclusiveness

Well jeez, so long as it's all about money, why race at flyaways at all? I mean the total income from the 2 US rounds was probably less than just Jerez, and now that Portimao is up and rolling, that's within driving distance of Extremadura, Castilla and Galicia without difficulty, that single round could beat out both US rounds. Then add a 3rd one in Italy and you can scratch Malaysia and Qatar, add one at Hockenheim and you can scratch off Australia and no one has to fly anywhere!! and they're making the same money! Wouldn't that be fantastic!?!

you could even take it further and scratch Donnington and Brno off the calendar by doubling up the Jerez and Catalonia rounds! Then they don't even have to cross the channel or drive more than a couple hundred KM! imagine how cheap it'd be!!!

all sarcasm aside, I'm sure you've picked up by now that I think the championship loses something when all it pursues is money and doesn't work to include other countries and cultures. The beauty of the sport to me has always been that nomatter where you go in the world you find people mad with their love for bikes and racing, and it's something we can all come together around and enjoy. I think that going into the 2011 season and we don't have a race on at least 6 continents is frankly embarrassing.

Total votes: 28

how deos it compete financially ?

i'm lost at finding an explanation how come such a rather poor country can put resssources in a automotive racing circuit...

Total votes: 30

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