Cazoo Announces Debt Restructuring Deal to Slash Debt Burden

In breaking car dealer news and motor trade news, Cazoo has taken a decisive step towards securing its financial stability by confirming a significant debt-for-equity swap agreement with bondholders. The British online used car dealer, which has faced recent financial challenges, officially disclosed this transformative deal on September 20, as reported by cardealermagazine.co.uk.

This landmark agreement entails the cancellation of $630 million in convertible notes in exchange for $200 million in fresh senior secured debt and new equity. The outcome of this arrangement is a substantial reduction in Cazoo's debt load, while the maturity profile of its debt remains unaltered. The company anticipates the completion of these transactions by the end of the fourth quarter, pending ratification by shareholders.

Cazoo's decision to restructure its debt was prompted by a notification from the New York Stock Exchange (NYSE) due to its failure to meet certain trading rules. NYSE regulations dictate that listed companies must maintain an average market capitalisation exceeding $50 million for a consecutive 30 trading-day period. Falling below this threshold could have obligated Cazoo to repurchase the $630 million in notes if its shares ceased trading on the NYSE.

Upon successful completion of the deal, Cazoo's largest shareholder will become the US-based fund Viking Global Investors.

Alex Chesterman, Cazoo's founder and executive chairman, expressed his thoughts on the agreement. He noted, "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." Chesterman highlighted the company's progress in improving unit economics and reducing fixed costs, aligning Cazoo with its goal of securing profitability and a larger share of the UK's used car market.

Cazoo's newfound financial strength, if the proposed transactions are implemented, will open doors for raising additional funds and exploring strategic initiatives to complement its business model and brand. Chesterman emphasised the agreement's importance as a pivotal milestone for Cazoo and recommended that shareholders vote in favour of the proposals.

Should shareholders approve the latest proposals, Cazoo's board will undergo restructuring, reducing its composition from eight members to seven. Six of these members will be selected by the holders of the Company's Convertible Notes, with the remaining member chosen by Cazoo's current board of directors. The future of Alex Chesterman's position within the company remains uncertain, following his leadership through a turbulent financial period.

Notably, since its inception, Cazoo has challenged traditional car dealerships, often sparking controversy within the industry. Chesterman's criticisms of the UK motor trade as "flawed on every level" and his characterizations of dealers as "untrusted" and "permanently impaired" in 2020 were met with sharp responses from industry leaders. At a Car Dealer Live conference in March, a panel of dealers dubbed Cazoo as "arrogant and naive."

In 2023, Cazoo's business plan has entailed significant restructuring efforts, including job cuts, the closure of customer centres, and reductions in preparation sites. Additionally, the company has divested its operations in Italy and Spain, discontinued its UK car subscription business, and sold its data business, Cazana. Last week, Cazoo successfully completed the sale of its German business.

In conclusion, Cazoo's debt restructuring deal signifies a critical turning point in its journey towards financial stability and growth. This development, reported by cardealermagazine.co.uk, carries implications for the company's future direction and underscores the ongoing evolution of the automotive industry.

source http://autoengage.co.uk/home-page-6165/b/cazoo-announces-debt-restructuring-deal-to-slash-debt-burden