Cazoo 'agrees debt-for-equity swap' which will see bond holders seize control of troubled used car dealer

8:34 am, September 20, 2023

Troubled used car dealer Cazoo appears to have agreed terms on a deal with its bond holders which could see it ‘restructure’ its crippling debt.

The firm has been in talks with shareholders for several months after admitting in its accounts it was worried that it would be liable to repurchase the $630m notes should its shares cease to trade on the NYSE.

Car Dealer reported earlier in the year that Cazoo was ‘in discussions with a majority of the holders of its Convertible Notes on a potential debt restructuring’.

It now seems that a package has been agreed, potentially saving the firm from crisis.

What is Cazoo? Will it change used car sales forever?

Sky News reports that the ‘finishing touches’ are being put on a $630m debt-for-equity swap which will leave US fund Viking Global Investors as Cazoo’s biggest shareholder.

The transaction will involve $200m of new borrowing facilities, following financial difficulties in recent years.

Sources close to the deal say that an announcement to the New York Stock Exchange could come as soon as today (Sep 20).

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.’

A history of Cazoo: A look at used car dealer’s rapid rise and dramatic fall

Speculation is now rife that the latest development could spell the end of Alex Chesterman’s reign at the online dealer group with insiders saying he may step down. He has already stepped back from the CEO role.

Since founding Cazoo, Chesterman has made several attacks on traditional car dealers. Back in 2020, the former Zoopla boss described the UK motor trade as ‘flawed on every level’ and later labelled dealers ‘untrusted’ and ‘permanently impaired’.

His comments were roundly criticised by industry leaders with a panel of dealers labelling Cazoo ‘arrogant and naive’ at our Car Dealer Live conference in March.

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.