10:53 am, November 6, 2023
Cazoo has put into motion the wheels of a financial move aimed at reducing its debt.
Following the news in September that it had confirmed a ‘restructuring’ agreement, the online used car retailer has now made an exchange offer over its convertible notes.
A convertible note is a loan that is like an IOU and is used to finance debt in the short term. However, rather than getting money back plus interest, investors can be repaid with equity.
Cazoo has said holders of its existing convertible notes can exchange them for new secured notes and Class A ordinary shares in the company.
It added that holders of 85% of its notes that are due in 2027 – valued at $630m (circa £507.3m) in total – had already committed to take part.
The new notes will be issued by Cazoo Group Ltd and guaranteed by all its existing subsidiaries
Interest on the new notes will accrue at a rate of 6.00% per annum from their date of issue, with a minimum of 4.00% payable in cash and, at the option of the company, up to 2.00% payable in kind.
The decision to restructure Cazoo’s debt came after it received a written notice from the New York Stock Exchange (NYSE) for failing to meet its rules.
According to the regulations, firms listed on the NYSE mustn’t have an average market cap below $50m (£40.3m) for 30 consecutive days of trading.
By falling below that level, Cazoo feared it may end up being liable to buy back the $630m notes should its shares cease to trade on the NYSE.
The exchange offer expires at 11.59pm New York City time on December 4, 2023 (4.59am on December 5 in the UK).
