Nearly six months after Arrows Grand Prix openly admitted their financial problems to the Formula One world, the saga of unpaid debts, obscure facts, and mysterious investors is moving into full swing following the announcement that the Leafield-based squad have found a saviour and have submitted their entry for the 2003 season. Mystery, however, is still surrounding the team and their future. RaceFax Editor Forrest Bond tries to shed some light on the ongoing saga

It appears that the long-running Arrows saga may at last be drawing to a close, along with the doors of the Leafield team headquarters.

Over the last several weeks, the team have told employees, fans and the British courts that a major investor had at last been found for the financially stricken F1 squad. Facing court action brought by Heinz-Harald Frentzen, Cosworth Engineering and other creditors which would likely have resulted in what Americans call involuntary bankruptcy, the story was let out that a mysterious German consortium - Asset Trust & Partners - supposedly fronting for Middle Eastern interests, was on the verge of concluding a purchase.

In a November 5th press release, the team announced that contracts had been signed which would provide, "for the introduction of substantial new equity" into the debt-ridden concern.

We've heard that before, just as we've previously heard, and heard again in early November, that the process was taking longer than anticipated, because of (a) the difficulty involved in the buyer doing due diligence, or (b) the number of people involved in the takeover entity.

The story was given further credibility by one Oliver Behring, who claimed to be the managing director of Asset Trust. That company was in turn representing "German Grand Prix Racing," which was backed by an unnamed "Arab sheik."

Talking to Sport1, Behring said definitively: "We have bought the majority of the Arrows shares to enter F1 and to have success in the sport." Dispelling a rumour then in circulation, he added that, "We are not planning to pass the license on to Audi or Volkswagen. We have our own interest in turning Arrows into a winning team." And then, with an unconscious nod to Alexander Haig ("I'm in control here," said from the White House after the shooting of then–President Ronald Reagan), Behring pontificated that, "The Arabs took over the majority of the team, but I'm still the managing director. The decisions are taken by me and not by the Arabs," who had unexplainedly gone from singular to plural.

Somehow, all this was evidently taken at face value by the London High Court's Mr. Justice Lightman, who accepted Arrows' November 13th plea to be placed under "administration," the British equivalent of the US's Chapter 11, a form of bankruptcy aimed at reorganization, rather than liquidation, conducted under the control of a court-appointed administrator. Lawyers for Arrows said the move was temporary, and that application would be made to remove the company from administration as soon as the investment/takeover deal is completed. Two days later, precisely on the FIA's deadline, the team filed their official entry application for the 2003 F1 season.

What the court evidently overlooked is that Arrows has no drivers, no engines, no sponsors, and pending an actual infusion of capital from investors or the sale of the team, no money. Further, the factory has been closed for months, technical director Mike Coughlan has long-since departed, along with other engineers, and no work has been done on a new car.

The FIA will not have been as sanguine, and the entry form requires that drivers and engine supplier be listed. Under the prevailing circumstances, a showing of financial stability will probably also be required, prior to the publishing of the official entry list in December.

There being no indication that a court administrator had authorized the expenditure, the entry fee was presumably covered by Arrows minority owner Tom Walkinshaw, majority owner/investment banker Morgan Grenfell, or Asset Trust. No administrator has as yet been appointed by the court, so no authorization to disburse any remaining team funds could have been obtained.

As for engines, Walkinshaw's TWR company has one that would at least allow the cars to be fired up and complete laps, though Cosworth engines - the only customer engine left in F1 - seem more than a little unlikely, at least until the 2002 invoices are paid. The FIA merely confirmed receipt of the application, not its acceptance.

Assuming this latest deal is completed, Arrows is by no means assured of being allowed to compete in F1 next season. The team missed the last five GPs in 2002, and it appears Walkinshaw has largely lost the support of the other team owners. Against that, both the FIA and commercial rights holder Bernie Ecclestone are not anxious to lose any further teams, particularly in this economic environment.

Speaking to Australian journalists in a traditional year-end teleconference, Mosley said, "It would be nice to have 22 cars (in 2003). I think 20 is more probable as the number, not necessarily because (of) Arrows, but because there are another team or two that are not 100 percent in good shape, but we are just keeping our fingers crossed that they will all be there in March." Mosley was no doubt referring to Minardi and Jordan.

That raises the possibility of 18-car grids, because it increasingly appears that Asset Trust is no more real than was Cal Smith, the evidently mythical American who was touted as a buyer of Arrows some months ago.

It is impossible to avoid the conclusion that 'Cal Smith' was created to forestall a move to have Arrows thrown out of the Concorde Agreement for missing races, and that Asset Trust & Partner as a front for United Arab Emirates sheiks or businessmen was created to forestall a 'winding-up order' from the British courts, i.e., involuntary bankruptcy.

The statement by Oliver Behring that a controlling interest in Arrows had already been purchased is evidently a pasture fertilizer pookie. Majority ownership could only be purchased from Morgan Grenfell. On November 12th, a spokesman for Deutsche Bank AG, which owns Morgan Grenfell, said unequivocally that, "We haven't sold it."

On November 18th, the High Court put Arrows's application for administration on hold, pending a hearing on December 2nd, at which Mr. Justice Lightman will decide if Morgan Grenfell has what amounts to a lien on Arrows' assets, and separately, whether or not the firm has in fact received personal guarantees from Tom Walkinshaw to cover their losses, as the company evidently maintains. It is being reported that Morgan Grenfell may make its own application to the High Court that Arrows be placed in administration for its benefit, thereby protecting whatever assets may remain.

In addition, the Arrows employees, who have been asked to sit at home these last several weeks, in hopes of ultimately getting back pay and a return to work through either a major investment in the team or a takeover, have this week received a letter informing them that their 'unpaid leave' is over: they are now former employees.

Earlier, Wayne Humphreys, the team's director of finance, and another highly placed executive, Nigel Levery, have also been rendered redundant, to use the rather quaint British term for being put through the front door. According to an employee chat forum on the Internet, both plan to seek legal recourse for wrongful termination. Even if they are successful, it will merely place them on a growing list of Arrows creditors, and of course Morgan Grenfell, Walkinshaw himself, and Cosworth are at the top.

If we're reading all this correctly, and there is no saviour coming to distribute Christmas cash at Arrows, then why is Walkinshaw going to such lengths to prolong the agony?

Originally - we're talking the 'Cal Smith' days - the purpose was obvious: keep the company/team alive in hopes of finding an investor or buyer. The introduction of Asset Trust served similar purposes, in that it kept the creditors out of court long enough for Walkinshaw to get the 2003 entry filed.

Now, however, we suspect that something else is at work. The firing of the entire staff indicates that Walkinshaw has finally accepted that Arrows cannot be saved. We therefore expect Walkinshaw to offer only token resistance to liquidation, and because we believe he is desperate to remain in Formula One, that he will attempt to purchase the assets in bankruptcy, for pennies on the dollar. Making that an even better deal, he'd get some of those pennies back, when the proceeds are distributed to creditors.

Walkinshaw buying the assets may, however, prove difficult, as we understand that the engine division within his TWR Group is in the process of laying off 100 employees (about 20 percent of the staff), and is in some degree of financial trouble.

If Walkinshaw can afford them, the Arrows assets would include the still-legal 2002 Arrows, and Walkinshaw's TWR Group could provide engines. Paying drivers are fairly thick under foot, and all Major Tom would need to go right on down the road would be a sponsor or minority partner, though as the last four months have shown, finding either will not be easy. The investment would, however, have to include the nearly $50 million refundable guarantee which must be paid to the FIA by a new team, and as the ill-fated Prost-Phoenix scam made clear to Walkinshaw, the Arrows membership in the Concorde Club would not be a transferable asset.

That last bit is, of course, rather speculative, but time will tell how close we are to the mark. And thanks to a couple of court dates, time is running out. What seems only too clear to us, though, is that Arrows is racing's equivalent of a horse with a broken leg, and needs to be put out of its suffering.

Because Walkinshaw has evidently used up what political capital he had, and more importantly, because the continual speculation about the smaller teams' chances of survival is not the image Max Mosley, Bernie Ecclestone, the major team owners and the engine manufacturers want for 'their' Formula One, we suspect they'll be only happy to assist in loading the pistol. As that shakes out, we hope everyone will spare a thought for the many loyal team members who have become the latest victims of this sordid saga.