11:11 am, May 21, 2024
Cazoo today brought in joint administrators but it’ll continue to trade for now and its employees have been kept on.
Financial advisory business Teneo made the announcement this afternoon, saying that the directors of Cazoo Ltd, Cazoo Holdings Ltd, and Cazoo Properties Ltd had appointed Matthew Mawhinney and David Soden as administrators.
It added that the directors of Cayman Islands-based Cazoo Group, which is the three firms’ parent company and is listed on the New York Stock Exchange (NYSE), had begun steps to put Cazoo Group Ltd into voluntary liquidation.
Cazoo Ltd is the operating subsidiary via which its online used car marketplace business – to which it recently transitioned from online used car sales – is conducted.
Cazoo Holdings Ltd is the group’s holding company in the UK and has no material assets other than an ownership interest in the group’s subsidiaries.
Meanwhile, Cazoo Properties Ltd is an intermediate holding company and property company that owned the leases to Cazoo’s customer collection and vehicle preparation centres, with each of them being a subsidiary themselves.
Car Dealer reported earlier today that Cazoo was believed to be calling in administrators today and the announcement from Teneo has confirmed just that.
In addition, Cazoo today said that it received a non-compliance notice from the NYSE on May 16 after it failed to file its accounts for 2023 in time. As such, the NYSE can begin delisting proceedings at any time.
Cazoo said it had been unable to file them ‘without unreasonable effort or expense’ following its switch to become an online used car marketplace outfit, as well as ‘the significant amount of time devoted by management to pursue strategic initiatives’.
It comes less than a fortnight after Cazoo Group said notices of intention to appoint administrators had been filed with the High Court.
That helped keep the wolves from its doors, stopping creditors from taking debt enforcement action without court permission.
Now that the insolvency practitioners have been formally appointed, an administration moratorium will take effect.
Teneo said that Mawhinney and Soden will continue to trade the company, which employs circa 208 people.
It added that as part of the administration process, circa 124 employees with the marketplace model, who are mainly based in London, have been kept on and the administrators hope that a sale of it will see many of them transfer to new employers.
Meanwhile, some 25 employees at the Manchester and Northampton customer collections centres have also been retained and it is hoped that they’ll transfer to new employers in the event of a sale.
Finally, circa 59 employees have been kept on ‘to assist with the orderly wind-down of the business’. They’re mainly based in the group’s head office and customer service centres in London and Southampton.
G3 Remarketing bought Cazoo’s Bedford-based wholesale arm yesterday, with its 28 employees transferring across.
Four days earlier, on May 17, Cazoo’s vehicle repair centre in Thurleigh as well as its customer collection centres in Birmingham and Bristol were ‘sold to companies in the Constellation Group, the owners of Cinch, said Teneo today, adding that it saw 23 employees transferred to Cinch that day.
But the transition to the marketplace model saw 728 redundancies being made after a consultation process that was carried out between March 1 and May 17, said Teneo.
In a statement, Mawhinney said today: ‘Following Cazoo’s decision to pivot to a marketplace model, the group has been winding down its legacy operations and sold a substantial number of its businesses and assets.
‘These sales have generated additional value for creditors, preserved a significant number of jobs, and ensured that leases have been transferred to new operators to mitigate losses to landlords.
‘Following our appointment, we continue to progress discussions with a number of interested parties on the marketplace business and remaining customer collections centres.
‘The marketplace model is performing ahead of expectations, with strong dealer sign-up, and the administration appointment provides us with an opportunity to secure a sale of the business over the course of [the] coming weeks.’
Teneo said today that the marketplace model was now established and generating revenue, with nearly 100 car dealers ‘including many household names’ wanting to trade on Cazoo’s platform
On May 1, Cazoo Group announced that Cazoo Ltd had successfully sold substantially all of its inventory, paid off its stocking loans and reduced employee numbers.
It told the USA’s Securities and Exchange Commission (SEC) today that as of May 21, 2024, the assets of certain vehicle repair centres and customer collection centres plus the wholesale division had been sold.
‘In each case a number of employees were transferred to the buyers,’ it said. ‘Together with other initiatives, the transition has reduced the cash burn of the company and its consolidated subsidiaries, resulting in a cash position in excess of £98m at May 13, 2024 compared to £113m at December 31, 2023.’
Cazoo also told the SEC today that despite pivoting to a marketplace model and disposing of various assets, it would still need extra capital to continue as a going concern in the medium to long term so because the administrators had filed for administration, the board had decided ‘that it is in the best interests of the company and its stakeholders to commence the winding-up of the company’.
The board plans to hold an extraordinary general meeting of shareholders on June 6 to seek shareholder approval to wind up the company.
If they approve the winding-up, liquidators will be appointed to ‘liquidate any remaining assets and satisfy, or make reasonable provisions for, the company’s remaining obligations’.
It’s not expected that any proceeds will remain for shareholders.
It was also revealed in the SEC filing that Cazoo Group failed to make required interest payments of some $5.3m that were due on May 15, 2024. It now has a 30-day grace period to make the payment before it’s classed as a default.
It was also given 60 days to present its accounts for 2023 or face having to immediately pay its senior secured notes, which are corporate bonds or loans guaranteed by collateral that lenders can claim if there’s a default.
Car Dealer asked Cazoo for a comment but the company said Teneo would now handle any inquiries. Cazoo earlier told us that it had no comment or statement to make at that stage.
Teneo said today that Cazoo stopped selling cars directly to the public in April. As a result, it (Cazoo) doesn’t have any customer deposits and all customer vehicle deliveries have been completed.
Customers who have extended warranties aren’t expected to be affected by the administration.
The administrators said they’ll be getting in touch with customers who have service plans and warranty claims (excluding extended warranty) to outline their options.
Motors has already been linked to a possible sale, and Sky News cited an industry source as saying that BMW and CarGurus were also possibly circling.
Constellation Automotive Group, the owner of previous rival Cinch, reportedly agreed to take over a handful of remaining Cazoo sites, in a deal that would save a number of jobs.
The SEC, which is an independent agency of the US federal government and protects investors as well as enforcing the law against market manipulation, was told today by Cazoo that: ‘Despite the successful transition [to the marketplace platform], to optimise returns to creditors the administrations mark the appropriate next step in the restructuring of the business.
‘The joint administrators…will continue discussions with new and existing parties interested in the marketplace business, with a view to concluding a sale over the coming weeks.’
Car Dealer reported as far back as last December that Cazoo had said it faced going under.
It had been trying to find fresh investment funds, following years of losses, but in a bombshell announcement to the New York Stock Exchange on May 1, Cazoo said it had failed to secure any new funding for the struggling business.
Cazoo said it had also been looking for offers for the business as well as ‘strategic alternatives’ – all of which had failed.
The announcement included the news that it had missed the deadline for reporting its 2023 accounts – citing pressures on management – and that CFO Paul Woolf had left the business.
His departure followed that of Cazoo founder Alex Chesterman and former CEO Paul Whitehead, who both left the company in the past few months.
Cazoo’s financial trials and tribulations led to a restructuring deal that saw its $630m (circa £496m) debt converted to $200m (£157m).
Cazoo was founded in 2018 but Chesterman sparked widespread ire with his criticism of how the used car industry operated.
It splashed out millions in sports sponsorship deals and expanded into continental Europe on a wave of optimism. But that optimism soon proved to be misplaced and it withdrew from its sponsorships as well as retreating to the UK.
You can learn more about the turbulent history of Cazoo here.
Alternatively, you can watch our special documentary all about the firm’s rise and fall below:
This news story was originally published at 11.11am today, updated at 2.54pm with news of the joint administrators’ appointment as well as the non-compliance notice from the NYSE, and updated again at 3.18pm with Cazoo’s response to our request for a comment.
