Corporate Sponsors Remain a Concern for 2010

Relying on Nortel, GM, Petrocan and the IOC, VANOC says budget is on schedule - but gaps could emerge

DAVID EBNER, March 26, 2009, Globe and Mail

VANCOUVER -- About $66-million piled in during three dark months of the financial crisis from domestic and international sponsors - most of it in cash - to fill the coffers of VANOC, the organizers of the Vancouver 2010 Winter Olympics.

VANOC expects a total of about $950-million from sponsors and a total of $365-million has been collected through the end of January, according to a quarterly update issued yesterday.

The sponsors' money is about half of VANOC's total $1.8-billion operating budget. About $500-million of the sponsorships is to be cash, and $450-million is so-called value-in-kind, such as cars from General Motors Canada or telecommunications network equipment from Nortel Networks Corp.

With ailing sponsors such as GM and Nortel, and major supporters suddenly in corporate flux, such as Petro-Canada facing a merger with Suncor Energy Inc., the big challenge and uncertainty for VANOC is collecting about $200-million from sponsors for its fiscal 2009, ending in July, and $400-million for fiscal 2010.

"It's obviously been challenging times," John Furlong, chief executive officer of VANOC, said in an interview at a GM athletes event yesterday, though money is being received on schedule.

One persistent gap in the sponsors budget is an estimated $40-million shortfall among so-called Top sponsors delivered by the International Olympic Committee. Nine names including McDonald's and Visa are Top sponsors but two slots are empty.

Mr. Furlong yesterday revealed that the IOC is in "serious negotiations" to add two corporate names.

"We're counting on that," Mr. Furlong said.

VANOC, as of the end of January, had $77-million budgeted for contingencies.
Among financially stressed sponsors, GM has been a constant worry. The company is restructuring, hoping for more government aid, and it is one of VANOC's largest backers at $71-million. More than half has been delivered, including the $14-million in cash. Most of the sponsorship is in vehicles, a deployed fleet of 200 currently set to spike to 4,629 next February.

"We're going to fully deliver," said Tom Laurie, manager of the Olympics partnership for GM Canada.

At Petro-Canada, which is in a $19-billion takeover deal with Suncor, the firm is providing VANOC $63-million in support, including $18-million in cash. Much of the sponsorship is fuel.

Suncor said it hasn't yet considered in detail inheriting the Olympics sponsorship. The Petrocan name will be retained in the merger as the brand for gasoline stations and Suncor said it plans to maintain the Olympic position.

"Clearly, we want to support, not dilute, the strong, trusted and nationally recognized Petro-Canada brand," said Suncor spokesman Brad Bellows.

Nortel Networks, under court protection from creditors and facing a possibly break-up of the company, said its support remains solid. It has delivered most of its estimated $15-million sponsorship, consisting of network equipment for telecom operator and lead sponsor Bell Canada.

The biggest risk for VANOC is coming up short on its budget, said Lindsay Meredith, a marketing professor at Simon Fraser University in the Vancouver suburb of Burnaby.

"I sure wouldn't count the chickens before they're hatched," Mr. Meredith said.
On the IOC sponsors side, the risk isn't a full $40-million gap but simply receiving less than expected. Mr. Meredith thinks the IOC will be able to sign up two more sponsors but possibly not at the same market rate as it signed on earlier supporters.

VANOC is also working with several small Canadian sponsors to add to its domestic support.

Finally, a VANOC bank line of credit was cut to $30-million from $95-million last October. VANOC has drawn $27.8-million on the line from Royal Bank, a major sponsor who asked the committee to temporarily reduce the line as part of the bank's efforts to reduce its outstanding exposures.

Dave Cobb, a VANOC executive vice-president, told reporters yesterday the credit line will be expanded again later this year and noted VANOC had cash of $189-million on hand at the end of January.