11:47 am, July 18, 2024
Failed used car dealer Cazoo collapsed owing almost £260m to its creditors, damning new documents have revealed.
Papers have been filed this week with Companies House by administrators Teneo, laying bare the full extent of the company’s turmoil.
They show that Cazoo’s three businesses – Cazoo Ltd, Cazoo Properties Ltd and Cazoo Holdings Ltd – owed money to a combined 10,107 creditors.
As reported by Car Dealer earlier this month, Cazoo Ltd – the operating subsidiary via which Cayman Islands-based Cazoo Group ran its marketplace business – owed a total of £189,088,897 by the time it ceased trading.
The new documents also reveal the firm had a whopping 10,074 creditors by the time it collapsed.
Meanwhile, Cazoo Properties Ltd owed £68,783,520 to 25 firms and Cazoo Holdings Ltd folded with eight creditors owed a combined £1,381,343.
Overall, the three Cazoo companies crashed with a crippling £259,253,760 of unsecured debt.
Teneo also says that the list isn’t ‘exhaustive’ and that more creditors are likely to come forward.
As part of the insolvency proceedings, all three businesses have had their names changed via Companies House.
Cazoo Ltd is now operating as ‘CL 1 Realisations Ltd’, Cazoo Properties Ltd is now ‘CPL 1 Realisations Ltd’ and Cazoo Holdings Ltd has become ‘CHL 1 Realisations Ltd’.
The administrators believe that the companies should have sufficient assets to repay unsecured creditors.
The statement says: ‘On present information we anticipate that sufficient funds will be realised to enable a distribution to unsecured creditors in all of the Companies.
Teneo’s costs are set to come in at a combined £3,798,296.
Administrators say what went wrong
The ‘statement of administrator’s proposals’ documents have also given more insight into how Cazoo came to be in so much financial trouble.
Teneo said the company’s ‘aggressive expansion strategies’ were at least partly to blame for the collapse, as the firm sought to establish itself quickly in the marketplace.
It said the policy – which was largely driven by controversial founder Alex Chesterman – led to costs ‘outpacing revenue generation, resulting in substantial losses’.
The administrators also said that supply chain issues, inflation and interest rates had all contributed to the collapse.
In the documents, they say: ‘The group’s financial challenges were driven by a combination of factors, in particular aggressive expansion strategies, a competitive market, high customer acquisition costs and unfavourable economic conditions.
‘The rapid growth strategy involved substantial investments in marketing, including sponsorship arrangements with football teams and sporting events, and high-end logistics and car reconditioning facilities.
‘While this approach aimed to capture market share quickly, the associated costs outpaced revenue generation, resulting in substantial losses.
‘In addition, supply chain issues limited new car production in 2022, which increased used car prices. This made it challenging for the group to acquire inventory at prices which allowed for profitable margins.
‘Throughout 2022 and 2023, rising interest rates and inflation impacted consumer spending power and ultimately resulted in a slowdown in used car purchases.
‘In light of the above, and despite the successful listing on the NYSE, the group generated a significant loss of c.£329m in FY2021, which trebled from c.£103m in FY2020.
‘This resulted in the share price reducing c.50% in the first 12 months and c.99% within two years of listing.’
At Cazoo’s peak, its shares were valued at some $8bn and it had more than 4,500 staff.
Earlier this month (Jul 2), Cazoo Group shareholders approved resolutions for the company to be placed in a voluntary winding-up as well as to appoint voluntary liquidators.
The US-based Securities and Exchange Commission’s notice from Cazoo said that it would be placed in voluntary liquidation based on the fact ‘it is unable to pay its debts’.
The Cazoo brand was sold to Motors for an undisclosed sum towards the end of last month.
You can learn more about Cazoo’s rapid rise and fall here. Car Dealer also produced a special documentary about the firm, which can be watched on our YouTube channel.
The full report from the administrators can be found here.
