9:56 pm, May 22, 2023
Used car dealer Cazoo has revealed it is in talks to ‘restructure’ its $630m of debt with the bond holders.
In a late New York Stock Exchange announcement this evening, Cazoo said it was ‘in discussions with a majority of the holders of its Convertible Notes on a potential debt restructuring’.
Cazoo issued the bonds last February and pays two per cent interest per annum on the cash. The funding was led by Viking Global Investors.
Cazoo admitted in its annual accounts that it is seriously worried it is liable to repurchase the $630m notes should its shares cease to trade on the NYSE.
The share price has fallen 12 per cent in the last five days alone to $1.20 – perilously close to the $1 limit the exchange says companies must trade above to keep their listed status.
Cazoo has already been forced to merge its share capital to boost its share price to avoid falling foul of that rule. It completed a 1-20 share swap in February this year, but the share price has continued to plummet.
The company now has a market cap of just £37m – down £3m in the last five days alone.
Despite the ‘open discussions’ over the debt, the troubled used car seller says the talks are in the early stages and there were ‘no assurances’ they will progress ‘or result in any agreement’.
The announcement said: ‘The company continues to explore possible strategic transactions to drive scale and accelerate its path to profitability and is in discussions with a majority of the holders of its convertible notes on a potential debt restructuring with a view to ensuring a more robust capital structure going forward, including a reduction in debt, the issuance of additional equity and a lower aggregate interest cost per annum.
‘Unless the company and noteholders reach an agreement in principle, or as otherwise required by law, the company does not intend to provide any updates on these discussions.’
The used car dealer said it was also exploring ‘strategic transactions’ that it believes would ‘drive scale and accelerate its path to profitability’.
The update gives no details as to what these could look like.
So far this year, the used car dealer has been busy backing out of the deals it had done as part of its ill fated growth spurt.
Its business plan for 2023 has seen the firm cut hundreds of jobs, close customer centres and reduce the number of preparation sites it runs.
It has also sold its operations in Italy and Spain, shut down its car subscription business in the UK and sold its data business Cazana. Last week it completed the deal to sell its German business.
In the firm’s annual accounts for 2022, Cazoo admitted: ‘We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances – such capital may not be available to us, and therefore our business, operating results and financial condition may be materially adversely affected.
‘There is no guarantee that such financing will be available in the future on acceptable terms, or at all.’
Cazoo’s latest update said its plan to reduce costs and improve ‘unit economics’ were ‘coming together’.
It says its costs are reducing, its cash position ‘remains strong’ and as of the end of April it has £215m of cash available. But there are concerns this will continue to reduce over the year as losses continue.
This evening’s update added: ‘We have now completed our exit from the EU, allowing us to focus our efforts fully on the UK market, the largest in Europe.
‘We reiterate our guidance for 2023 and remain fully focused on improving our unit economics, optimising our fixed cost base and maximising our cash runway.’
Paul Whitehead, chief executive officer of Cazoo, who took over day-to-day operations from Alex Chesterman said he was pleased with the performance so far in the second quarter.
He said: ‘In April, we achieved our highest ever level of retail [gross profit per unit], ahead of the record result delivered in March, giving us confidence in our ability to maintain sustainable retail GPU improvement through the remainder of the year and beyond.
‘In Q2 2023, we expect Retail GPU to exceed £1,200, a significant further increase on the record level of £980 achieved in Q1 2023 and up from £309 in Q2 2022.’
Meanwhile, yesterday, the Sunday Times Rich List reported that Alex Chesterman had dropped out of its compilation.
Reporting on similar millionaires who had seen their fortunes drop, the paper said: ‘A similar fate has befallen Alex Chesterman, who initially made money from Zoopla and LoveFilm.
‘The share price of his car-selling start-up, Cazoo, has plummeted by 99 per cent since its US stock market float in August 2021.
‘We cannot identify sufficient wealth for him to meet the £350 million that would put him in our list this year.’
