Shareholders in Cazoo have agreed to an exchange offer over the firm’s convertible notes as the troubled used car dealer looks to reduce its debt.
A convertible note is a loan, like an IOU, that is used to finance debt in the short term. However, rather than getting money back plus interest, investors can be repaid with equity.
In a statement released this morning Cazoo said that all holders of its notes that are due in 2027 – valued at $630m (circa £507.3m) in total – had committed to take part.
Interest on the new notes will accrue at a rate of 6% per annum from their date of issue, with a minimum of 4% payable in cash and, at the option of the company, up to 2% payable in kind.
The exchange offer is one of a series of transactions that Cazoo is implementing in order to improve its capital structure and decrease its level of debt.
An extraordinary general meeting of the company’s shareholders will be now be held at 3pm tomorrow afternoon (Nov 21), where bosses will seek shareholder approval of the transactions.
Those at the top of Cazoo expect the transactions to close in the fourth quarter of 2023, subject to satisfaction of the closing conditions.
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.