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RPM In Default On $90 Million Loan

[1]According to a Sports Business Journal article on SceneDaily.com [2], Richard Petty Motorsports has been in default on a $90 million loan since February, but hopes to restructure the loan soon. Team owner George Gillett indicated that the default was technical, meaning that RPM did not fulfill one of the obligations of the loan, not that they missed payments.

But, the SBJ is reporting that an anonymous source indicated that Gillett’s explanation was not the truth. The source said that the default was indeed payment-related.

In 2007, Gillett purchased majority share in Evernham Motorsports, the team owned by three-time Cup champion crew chief Ray Evernham. Two years later, Gillett Evernham Motorsports merged with Petty Enterprises, becoming Richard Petty Motorsports.

At that time, PE was having its own financial problems. The team brought in Boston Ventures as an investor and signed then driver Bobby Labonte to an extension. But, by the end of 2008, PE was having trouble securing sponsorship for its famed No. 43, with General Mills [3] leaving to sponsor Richard Childress Racing’s No. 33 entry and driver Clint Bowyer. Labonte left the team [4] and the team merged with GEM [5].

As a result of the merger, the No. 45 car of PE was dropped, and the newly formed RPM featured the Nos. 9, 19, 43, and 44 (was the No. 10). The team was also laying off employees. Meanwhile, the team started to consider other makes [6] because it lost factory support from Dodge, whose parent company Chrysler was going through bankruptcy. The team also considered shrinking [7] from a four-car team to a three-car team.   

Two months later, RPM merged with Yates Racing [8] and switched to Fords. Reed Sorenson, driver of the No. 43 Dodge in 2009, was let go, and AJ Allmendinger moved from the No. 44 to the No. 43. The No. 44 team was closed down, and Paul Menard of Yates Racing took its spot with the No. 98. RPM also closed down its engine shop [9] because, with the merger, it would receive engines from Roush Yates Engines.

With so many mergers and changes, it’s not surprising that the team would still have financial problems.

One thing to note is that the debt belongs to RPM, not Gillett himself, meaning the creditors can not go after personal assets. They can only take possession of the race team’s assets.