Lead arranger Goldman Sachs is talking the new $1.7bn TLB due 2029 at S + 325bp-350bp area, with an OID of 97.5-98. Commitments are due Wednesday at noon ET. Proceeds, along with cash on hand, will be used to refinance existing debt and to pay some of it down.

The company has also fully syndicated a $725m TLA and issued a new $500m revolving credit facility, both of which are due in 2027. The debt is issued through Formula One, a subsidiary of Liberty Media.

Sources said the bookbuild was healthy, partly thanks to strong Liberty Media earnings (reported earlier this month) and the scarcity of the debt, given that a sizable chunk is being raised in TLA format (an increasingly popular funding tool amid market volatility).

“F1 has been crushing it in earnings especially post-Covid,” one portfolio manager said. “There’s going to be a food fight for the paper.”

The Formula One Group reported $715m of revenue for the third quarter, up 35% year-over-year; adjusted EBITDA grew by 40%, although the company did not provide a definitive figure.

Those strong earnings — combined with $500m of debt reduction through this transaction — led Moody’s and S&P to upgrade the company to Ba3/BB from B1/BB-.

Cash will fall to around $613m following the transaction (from $1.115bn) but the company will have less debt, a renewed revolver and an additional $1.09bn of cash and equivalents held outside the restricted group at Liberty Media, Moody’s noted.

Additionally, strong cash flows should allow for even more deleveraging down the line, sources said.

“They’re paying down debt and going from a TLB to a TLA, so very little will be available for new lenders,” said a credit analyst. “For that reason, I think you’ll see the spread tighten.”

Revving up

In-person race attendance is up 26% this year to date, compared to the last non-pandemic season in 2019, said the company in an investor presentation this week. Some 5.5 million spectators are expected this season, the company said.

Similarly, the franchise has a growing audience through streaming and TV. The company said a cumulative audience of some 1.5 billion people (or 70 million fans per race) watched the 2022 season, up some 45% compared to 2020.

The company will add two new races to the 2023 schedule, bringing its total to 24 events; however, both of those races come with additional risks.

One is set to take place in China, but could be cancelled due to the governments Covid restrictions.

The other is a race through the streets of Las Vegas that Liberty Media itself is promoting. The company will be responsible for logistics and ticket sales, which brings larger costs but potentially larger profits.

Longer term, Liberty Media has extended Formula One broadcasting agreements with Sky Sports in Europe through 2029 and its contracts with ServusTV in Austria and ESPN in the US are set to run through 2025.

In a sign of the sport’s popularity, more OEMs are looking to join the fray. Audi is set to enter the racing series as an engine supplier in 2026, and Porsche could be the next to join. They will take on the Red Bull racing team, which is set to earn its second consecutive drivers championship this week, with Max Verstappen as its main driver.

Should this deal sail through as market participants expect, it will cement the recent trend of markets reopening — but only for strong credit stories.

“Stuff like this can easily clear the market when it’s a real business that’s generating cash,” one buysider said. “Those other deals that are in a tough sector or from an aggressive sponsor, those are the ones that have to pay up in this market.”

Goldman Sachs declined to comment for this piece. Liberty Media did not respond to a request for comment.