The future of the Balatonring circuit near Hungary's Lake Balaton is once again uncertain, after the Hungarian Development Bank MFB refused to underwrite a loan needed for completion of the project, according to the Hungarian business news service MTI-ECO. The loan of 15.3 billion Hungarian Forints HUF (around 57.6 million Euros or 79.3 million dollars) was part of a total package of of over 35 billion HUF in government subsidy needed to complete the 40 billion HUF project.
The MFB refused to underwrite the loan after undertaking a due diligence process. Under the terms of the loan, the state would be providing 70% of the financing of the project, while receiving a 30% stake in the Balatonring circuit. Due diligence revealed that no calculations had been done on the return on investment of the project, making it impossible to judge the value of investing in construction of the circuit. A statement issued by the MFB said that the bank had negotiated with investor about the business risks, but that the investor could not accept the conditions which the MFB had put on the loan.
According to MTI-ECO, the Hungarian government is still committed to the construction of the Balatonring circuit. However, the government were now only prepared to fund the MotoGP round itself, leaving the construction firm - Savoly Motorcentrum Fejleszto - to find other sources of finance for the construction work involved.
That may in itself prove a problem. The project has been surrounded by controversy from the start, starting as a collaboration between the Spanish construction company Sedesa and a Hungarian regional development agency, right before the global economic crisis plunged the Spanish construction industry into meltdown and caused the Hungarian Forint to plummet in value. Initial financing delays meant that the race initially scheduled for last year had to be canceled, and the inaugural race there moved up to September 2010.
The project then seemed to be making headway until earlier this month, when the anti-corruption organization Transparency International and the Hungarian Civil Liberties Union called for the project to be halted over concerns over the lack of oversight of public funds. The head of Grupo Milton Management Zrt, the company responsible for managing the project, was convicted of corruption charges in 1995, and the feasibility study of the project had not only not been published, but journalists were refused access to the study, despite making applications under Hungary's freedom of information act.
The accusations appear to be what precipitated the MFB withdrawing support for the project, after a leaked memo showed that the heads of Hungary's finance department opposed funding of the Balatonring circuit. The atmosphere surrounding the project even caused Tamas Suchman, the head of the Balatonring Development Agency, to resign on Thursday. "I do not want to participate in such a project where every kind of accusation has been started, from blackmail to the uncertainty of recouping the investment," Hungarian business website RealDeal.hu reports Suchman as saying.
Whether or not the Balatonring circuit is completed by September, at least the MotoGP calendar will not lose a race. The Motorland Aragon circuit has been nominated as a reserve for the season, ready to take the place of the Hungarian GP should it be canceled. That would give Spain a total of four races held on its territory, but given the spectacular nature of the track close to Alcañiz in the Aragon region, this would most likely be welcomed by both fans and riders.