When Max Verstappen crossed the finish line in first place at Formula 1’s Austrian Grand Prix last weekend, millions of viewers will have caught a glimpse of the logos for CDW, the IT solutions provider, and Block, the owner of Square and CashApp.

Those companies — both borrowers in the leveraged credit markets — had their insignia plastered to the front of the Red Bull Racing car. There are more of them all over F1 drivers’ suits and helmets, as well as the tracks they speed around.

By our count, at least 28 leveraged borrowers (see the full list here, across bonds and loans) are F1 sponsors, either of the race operator itself or one of the 10 teams in this year’s Constructors Championship. They represent 9.5% of the 294 companies currently sponsoring the sport.

That may not seem like much, but it feels like a lot because a) it’s generally big investment grade names like Nike or Pepsi that sponsor major sporting events and b) sponsorships don’t come cheap, and many leveraged credits are feeling the pinch right now.

Just one example: when marketing its buyout debt to credit investors earlier this year, MoneyGram attributed its declining EBITDA to the $6m it spent on its F1 sponsorship.

The high yield market’s F1 sponsors run the gamut from household names like Hilton and Yahoo to more obscure software credits like TeamViewer and Alteryx.

MoneyGram isn’t the only one of them to have recently tapped the primary market. Data storage company Seagate, which sponsors Alfa Romeo borrowed $1bn in a two-part bond deal in May, and chemicals company INEOS, which backs the Mercedes-AMG Petronas team, raised $2.8bn-equivalent across four bond and loan tranches in February.

Liberty Media, which owns the rights to the F1 racing series, is also a HY borrower. It tapped the market last November to raise a $725m TLB due 2027.

Basically, we decided there was sufficient intrigue for us to crunch some numbers. Here are some facts about the high yield market’s F1 sponsors — they may or may not be useful, but they’re kind of fun:

Fast facts

• Between them, these 28 companies have some $59bn-equivalent of bonds and loans outstanding across 77 issuances, according to 9fin data
• Although F1 is a European-dominated sport, around 77% of this debt is in US dollars
• Hilton is the largest such issuer, with more than $8.6bn-equivalent of debt across bonds and loans, followed by INEOS with nearly $8bn and Seagate with around $6bn
• The leveraged market’s F1 sponsors largely fall into four main industries: consumer discretionary, financials, industrials, and information technology

• More than half of the debt issued by these companies was rated double-B or higher at issuance; the same goes for the companies’ corporate-level ratings
• Seagate was investment grade when it issued, but has since been downgraded to a corporate family rating of Ba2/BB/BB+
• By contrast, Bombardier was rated CCC+ with negative outlook when it started sponsoring Aston Martin (also a HY borrower) back in 2021, but has since been upgraded to B2/B

So why are so many LevFin credits attached to sponsoring F1 teams? We have a couple of home-brewed theories:

1) Global reach

Formula 1 attracted 1.54 billion cumulative TV viewers last year, so advertising potential is an obvious appeal. But the in-person networking possibilities are just as important for some brands.

These races are hosted all over the world, and provide opportunities for these companies to interact with potential clients or investors and generally rub shoulders with influential people in their industries.

Executives at TeamViewer said as much during the company’s 2022 annual report in March, before announcing that it would downsize and amend its sponsorship of Manchester United Football Club, according to a doc search we did on 9fin:

Our partnerships with Manchester United Football Club and the Mercedes-AMG Petronas Formula 1 Team, which have been in place since 2021, have led to more visibility worldwide in 2022. At numerous events on the sidelines of football matches and F1 races, our sales colleagues were able to successfully present our solutions and engage in sales talks with representatives of customers and partners.

New race locations are providing more opportunities for companies to sponsor. Gaming and hospitality company MGM Resorts was added to the docket of sponsors this year, with the introduction of an F1 race in Las Vegas later this season.

2) The cost

Sponsoring F1 also seems to be a bit cheaper than sponsoring one of the four major American sports: football, basketball, baseball and hockey.

For example, high-yield issuer Cleveland-Cliffs reportedly spends $10m a year to have its logo patched on the jerseys of the NBA’s Cleveland Cavaliers basketball team.

By comparison, MoneyGram recently disclosed that it spent around $6m this year to become the title sponsor for the Haas F1 team (this is the move that contributed to its adjusted EBITDA falling 3% year-over-year in the first quarter, as we mentioned earlier).

Sponsoring the Cavs is likely to be less expensive than the LA Lakers, and backing Haas is probably less expensive than a winning team like Red Bull. Even so, MoneyGram believes there is value in the marketing effort despite the drag on earnings:

“I'm really excited about what it can do, but that's a long-term investment,” said MoneyGram CFO Brian Johnson during a recent call with debt investors. “We haven't quite seen the top-line impact yet but we really think from a brand perception and long-term value creation perspective, investments like that — in addition to reinvesting in product and IT — are the right decisions to make.”

Formula 1 as a whole generates lower sponsorship revenue than many other sports: it totaled around $356m in 2022, according to Liberty Media’s latest annual report.

By comparison, the sponsorship revenue for the most recent completed season for the NHL drew $753m and the NFL led US sports with $1.88bn of sponsorship revenue, according to a report from consulting firm IEG released in February.

Even soccer — another European-dominated sport that has struggled to break out in America — generates more sponsorship revenue than F1, with Major League Soccer attracting some $677m of sponsorship revenue during its latest season.

What’s the implication of all of this? Probably nothing, but at least now you have some data-driven context to explain why CrowdStrike is displayed on Lewis Hamilton’s chest.