12:51 pm, September 20, 2023
Cazoo has officially confirmed a debt-for-equity swap deal with its bond holders as it looks to ‘materially reduce its debt’.
Car Dealer reported this morning (Sep 20) that terms had been agreed on the landmark agreement and that an announcement was expected soon.
Just hours later, confirmation has arrived from the troubled used car dealer that a new arrangement has been reached.
Bosses say that $630m of convertible notes will now be cancelled in exchange for $200m of new senior secured debt and new equity.
The deal will see Cazoo’s level of debt ‘significantly reduced’ while its debt maturity profile remains unchanged.
It is hoped that the transactions will be complete by the end of Q4, but the terms will first have to be ratified by shareholders.
The decision to restructure the debt came after Cazoo 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 must not have an average market cap below $50m for a consecutive 30 trading-day period.
By falling below that level, Cazoo feared it may end up being liable to repurchase the $630m notes should its shares cease to trade on the NYSE.
If the deal goes through, it will leave the US-fund, Viking Global Investors, as Cazoo’s biggest shareholder.
Alex Chesterman, founder and executive chairman of Cazoo, commented, ‘Today’s agreement represents an opportunity to significantly deleverage Cazoo’s capital structure and enhance the financial flexibility Cazoo needs in order to achieve profitable growth.
‘As our results for the first half of this year show, we are making good progress on improving our unit economics and reducing our fixed costs, bringing us closer to our objective of achieving profitable growth and capturing a higher share of the significant UK used car market.
‘Cazoo’s stronger balance sheet, if the transactions are implemented, is expected to strengthen our ability to raise additional finance and the deleveraged capital structure will enable us to explore potential strategic initiatives to complement the Cazoo business model and brand.
‘The agreement is a major milestone for Cazoo and the board recommends shareholders vote in favor of the proposals.’
Should the latest proposals be accepted by shareholders, Cazoo’s board will be reduced from eight members to seven.
Six of those will be chosen by the owners of the Company’s Convertible Notes and the other will be picked by Cazoo’s current board of directors.
It remains to be seen whether Chesterman would retain his position after he guided the company to the brink of financial oblivion.
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.
