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Autodrome backdoor bailout

AutodromePortugal Capital Ventures has notified the market of its purchase of Parkalgar Serviços, S.A. owner of the Portimão racetrack.

Portugal Capital Ventures, Sociedade de Capital de Risco, S.A. ('Portugal Ventures') normally invests in exciting high-tec start ups and  is an operating arm of IAPMEI, a government investment department under the Ministry for the Economy that normally specialises in helping companies develop their business in Europe and Africa.

Portugal Capital Ventures has acquired sole control of the Autódromo Internacional do Algarve racetrack and is now awaiting the green light from the Competition Authority which is expected to be a formality. Normally the company invests no more than 49% in any business but in this case has assumed control. The company also, and more curiously, is to sign a lease agreement with Parkalgar - Parques Tecnológicos e Desportivos, S.A. which is likely to be the registered owner of the physical assets of land and buildings.

'Portugal Capital Ventures has acquired sole control of Parkalgar services, and in turn acquires sole control over a set of assets comprising a business located in Portimão,’ according to the Competition Authority’s website.

Portugal Capital Ventures normally invests in start up ventures involving innovative scientific and technological developments at early, mid, and late venture stages. Its purchase of this racetrack is far from the company’s published terms of reference as the company normally invests in ventures with high growth potential and controls a minority of the share capital. It invests in expansion and development and provides capital for buyouts and it ‘will only invest a maximum of 49.9 % of the total investment in any company,’ according to its website.

The normal area of interest for Portugal Capital Ventures is in projects related to 'innovative areas, particularly in information technology, telecommunication, electronics, biotechnology, Internet, multimedia, life sciences, textiles and high technology,' not large racetracks.

Portugal Capital Ventures is controlled by IAPMEI, a government body that in turn comes under the control of the Portuguese Ministry of the Economy.

IAPMEI was established in response to a Portuguese government initiative to improve competitiveness in the Portuguese market. IAPMEI prefers to provide venture capital to improve companies’ competitiveness in Europe and Portuguese speaking Africa, not Portimão.

This looks like the use of public funds to bail out a poorly managed business. In that Portugal Capital Ventures has no background at all in motor racing or property development it may be a government sponsored holding operation to save the racetrack from folding while an eventual owner is sought.

In November 2012 Parkalgar was saved from insolvency when the court in Portimão agreed a financial restructuring plan which provided for the cancellation of €40 million of its €160 million of accumulated debt in return for reducing various personnel costs and selling some asssets. The time limit to repay the smaller creditors was stretched into the distant future and Parkalgar said it would sell off unfinished apartments to repay some debt. This agreement was a feeble attempt but it bought some time.

BCP bank and autodrome builder Bemposta accounted for over two thirds of Parkalgar’s debt when the rescue plan was rubber stamped in court and as they both agreed to the terms, it went ahead.

BCP bank of course was itself rescued by the government in 2012 using money taken from the country’s bailout package, some €3 billion.

If BCP is getting its loans to Parkalgar paid off from this deal then the government is in fact refinancing BCP under the guise of a splendid deal for Portugal Capital Ventures.

So, the taxpayer bailed out the bank that bailed out the autodrome that has been bailed out by the taxpayer. Whether the new owner, that's the state and therefore the taxpayer, has bought the racetrack as a turn-around business with prospects, or has just engineered the rescue of a €120 million loan on behalf of BCP is a question that will no doubt be addressed in the days to come as the implications of this suspect deal are analysed.


Click here for the competition authority announcement in Portuguese: http://www.concorrencia.pt/vPT/Controlo_de_concentracoes/Decisoes/Paginas/pesquisa.aspx?pNumb=29&yearNot=2013&pag=1&doc=True&est=1

Click here for the letter of notification in Portuguese: http://www.concorrencia.pt/FILES_TMP/Aviso_2013_29.pdf

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