Cazoo bondholders have agreed to swap the debt they own for shares in the online car dealer.
The deal comes as the struggling company seeks to cut its debts and improve performance as it continues to be hit by high interest rates on its borrowings and low profit per unit.
Cazoo’s borrowing stood at £649m at the end of last year.
Holders of $630m (£503m) of Cazoo debt will receive $200m of new bonds and shares “which will represent 92pc” of stock in the company, a Cazoo statement to the stock market stated. To go ahead, existing shareholders will have to back the deal, having already seen their investments plunge as Cazoo’s share price crashed more than 99% since it went public on the New York Stock Exchange in 2021.
Founder Alex Chesterman, who led Cazoo on a high-cost brand-building and expansion spree since 2020, faces his own 24% shareholding becoming just 2% if the deal gets shareholder backing.
Chief executive Paul Whitehead has been seeking to reduce the company’s cash burn in a race to improve performance. In an October update, Cazoo revealed the firm had £151m in cash, compared to £195m three months earlier, and would end the year with as little as £100m.
Cazoo has warned that the New York Stock Exchange has threatened to delist the company if its share price does not improve.
The transaction is designed to place Cazoo on a sustainable long-term footing after two turbulent years as a listed company, but some analysts warn it’s not a simple fix.
Since its launch in late 2019, Cazoo has sold more than 150,000 used cars with an aggregate value of £2.5bn, competing aggressively with franchised dealers plus rivals such as Cinch, owned by Constellation Automotive Group.
As editor, Tim is responsible for the media content, planning and production of AM’s multiple channels (AM print and digital magazines, website, social media and contributing to our events planning). He interviews and writes about as many franchised dealer groups and UK divisions of motor manufacturers as possible, to explore the issues facing UK motor retail and understand what solutions dealers and suppliers are using to overcome these.
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