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Richard Petty Motorsports In Danger Of Going Under?

Posted By Michael J Smith On October 21, 2010 @ 5:12 pm In Cup | 1 Comment

[2]FoxSports.com [3] is reporting that one day after releasing Kasey Kahne from his contract [4], Richard Petty Motorsports is in danger of going under after this weekend’s Tums Fast Relief 500 at Martinsville Speedway.

Lee Spencer writes:

The assembly line from Roush Fenway Racing and Roush Yates engines, which supply chassis and engines respectively, has stopped running to RPM. Engines have been picked up, cars have been repossessed, and sources on both sides — RPM and RFR — say no cars will be delivered beyond Martinsville this weekend.

RPM employees were told that they may not have jobs after the race at Martinsville.

The issue may stem from a lawsuit over the Liverpool Football Club of the Premier League. New England Sport Ventures, which was founded by RFR co-owner John W. Henry, bought the Liverpool team for $477 million. Shortly thereafter, RPM co-owner George Gillett threatened to sue.

About two months ago, Gillett and his business partner Tom Hicks put the Liverpool Football Club up for sale as the team was in its worst season in nearly 60 years, and bankruptcy loomed. Henry purchased the debt-ridden team earlier this month.

After day after the sale was negotiated and agreed upon, Gillett and Hicks, citing two higher bids for the team, tried to block Henry’s purchase of the team, calling the deal an “epic swindle.”

Right before the meeting to complete the sale started, a Dallas judge issued a temporary restraining order against three Liverpool board members, the Royal Bank of Scotland, and NESV.  Meanwhile, Hicks filed a $1.6 billion lawsuit, but later dropped it.

Hicks and Gillett were said to be scrambling to recapture the company, buying up the debt, and firing board members.

As a deadline to purchase the team rapidly approached, the Dallas court decided to hear the matter. If the sale was not completed by that evening, the team would’ve fallen into bankruptcy, meaning Henry wouldn’t be able to buy the team.

The British High Court ordered Hicks and Gillett to withdraw their claim or be held in contempt.

Henry tweeted:

We have a binding contract. Will fight Mill Hicks Gillett attempt to keep club today. Their last desperate attempt to entrench their regime.

The restraining order ended up being dropped, allowing Henry to purchase the team. To comply with the court order, Hicks and Gillett dropped the lawsuit, but it seems more legal action may be coming.

Many accounts of the sale described the situation as bitter, contentious, and heated. So, it’s likely that the business relationship between Henry and Gillett has been fractured to the point that the two could not continue their agreement in NASCAR, which could possibly explain why RFR repossessed engines and cars. This, however, is purely speculation.

Another possible reason for the repossession is that RPM is in financial trouble. Back in April, it was reported that RPM was in default on a $90 million loan. At the time, 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 an anonymous source told the Sports Business Journal that Gillett’s explanation was false. The source said that the default was indeed payment-related. If that’s the case, the team could still be in financial trouble.

The news that RPM is in financial trouble is interesting, given that Richard Petty came out and said the team was considering a third team in 2011 [5]. Petty said:

We’ve talked to a lot of people about a third car, but our main deal is make sure we’ve got two really good cars, and then we try to do a third deal. We’ve got until the end of the year [to make a decision]. If we’re downgrading from four teams to three teams, we’ve still got plenty of everything it would take to run that third car. It wouldn’t be like just having two, and then all of a sudden we’ve got to go out and get cars, people and trucks and all the equipment to run the third car. We can wait a pretty [long time], I think, as far as being able to get cars ready.

That quote leads me to believe that whatever caused the issue between RFR and RPM occurred recently because the team wouldn’t be planning to expand if they were that close to going under. Unless, of course, this was posturing.

Earlier this year, RPM had no drivers under contract for next season.

Kasey Kahne announced he was leaving the team back in April, after signing a deal with Hendrick Motorsports [6] to drive the No. 5 in 2012. He was slated to drive for Red Bull Racing next season; and he was taking his crew chief Kenny Francis with him [7]. But, yesterday he was released from his contract, allowing him to go there five races early.

Budweiser, Kahne’s sponsor, decided to leave the team to join Richard Childress Racing’s No. 29 team and driver Kevin Harvick [8]. Paul Menard is also leaving the team [9], taking his Menards sponsorship to RCR next season. And, Elliott Sadler announced in July that he was leaving the team [10].

Later that month, Marcos Ambrose was signed to replace Kahne [11] in the No. 9 Ford with Stanley signing on to sponsor him. In August, AJ Allmendinger re-signed with the team [12].

Update: Jenna Fryer [13], of the AP, tweeted that RPM does have cars for next weekend’s Amp Energy 500 at Tallaedga Superspeedway. She wrote:

Free RPM! Free RPM! Hearing they have their Talladega cars, all is well in the world.

Update 2: There are rumors that RPM owes Kahne money, and that was part of the reason he asked for an early release. But, Kahne said that RPM met all of its financial obligations to him. He also defended his decision not to finish the race at Charlotte. He said that the decision to split was not the financial uncertainty surrounding RPM. He has agreed to honor his sponsorship commitments to Budweiser for the remainder of the year.


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URLs in this post:

[1] Tweet: http://twitter.com/share

[2] Image: http://lead-lap.com/wp-content/uploads/2010/04/gillett1.jpg

[3] FoxSports.com: http://msn.foxsports.com/nascar/story/Richard-Petty-Motorsports-in-financial-crisis-in-NASCAR-Sprint-Cup-ranks-102110

[4] releasing Kasey Kahne from his contract: http://lead-lap.com/2010/10/21/kahne-released-from-richard-petty-motorsports/

[5] considering a third team in 2011: http://lead-lap.com/2010/09/27/rpm-does-not-rule-out-third-team-in-2011/

[6] signing a deal with Hendrick Motorsports: http://lead-lap.com/2010/04/13/report-kahne-signs-multi-year-deal-with-hms/

[7] taking his crew chief Kenny Francis with him: http://lead-lap.com/2010/10/11/report-francis-to-join-kahne-at-rbr/

[8] leave the team to join Richard Childress Racing’s No. 29 team and driver Kevin Harvick: http://lead-lap.com/2010/08/17/budweiser-to-sponsor-rcrs-no-29-harvick/

[9] leaving the team: http://lead-lap.com/2010/08/05/report-menard-agrees-in-principle-to-drive-for-rcr/

[10] leaving the team: http://lead-lap.com/2010/07/10/sadler-not-returning-to-rpm-next-season-open-to-other-options/

[11] was signed to replace Kahne: http://lead-lap.com/2010/08/17/rpm-signs-ambrose-stanley-to-sponsor-him/

[12] re-signed with the team: http://lead-lap.com/2010/08/04/report-allmendinger-signs-multi-year-extension-with-rpm/

[13] Jenna Fryer: http://twitter.com/JennaFryer

[14] : http://lead-lap.com/2010/10/21/richard-petty-motorsports-in-danger-of-going-under/

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