Aston Martin’s $250m debt issue gives it room to manoeuvre
Aston Martin has agreed a $250m (£200m) financing deal to support its growth plans and provide flexibility in the face of “macroeconomic headwinds and uncertainty”.
The luxury car manufacturer has endured a very difficult year after it listed on the London Stock Exchange last October and today again acknowledged “continuing pressure on sales volumes”.
Its share price has fallen steadily and significantly as investors reacted badly to poor trading updates. Despite some improvement in the last six weeks, last night’s close of 575p was still 70% lower than when it floated – reducing the group’s market value by £3bn.
But the debt issue announced this morning should provide some comfort, giving Aston Martin more room to manoeuvre as it looks to get its operational performance back on track.
Mark Wilson, Aston Martin Lagonda’s chief financial officer, said: “At the H1 results we highlighted that we expected macroeconomic headwinds and uncertainty to continue. These circumstances require flexibility in our financing arrangements to ensure that resources are available to deliver the Second Century Plan.
“What we have announced today is a cost and time-effective structure that immediately strengthens our liquidity in the short term and the option to draw further funding as we successfully execute the plan.”
Its has completed the pricing of a private placement of $150m of 12% Senior Secured Notes, which fall due in April 2022.
It can also issue an additional $100m (£80m) on the same terms if it secures 1,400 orders of the DBX within nine months of the Secured Notes being issued. Otherwise it can still access the cash, but at a 15% interest rate.
“The conditions on the Delayed Draw Notes are well within our order expectations,” said Wilson. “Aston Martin’s first SUV, the DBX, remains operationally on track and we are very pleased with the reception the car received at Monterey Car week during August.”
Aston Martin says it expects “to meet current analyst consensus for key financial metrics”, once the impact of the debt issue has been factored in. In July it revealed it lost £79m in the first half of the year after it missed its sales targets.
“The car manufacturer is known for its high end prices and that situation now also applies to its debt,” warned analyst Russ Mould, investment director at AJ Bell.
“These rates are very high and are a major red flag that investors consider the car company to be a high risk entity.
“Part of Aston Martin’s debt is structured as a PIK or payment-in-kind. Rather than paying interest each year, the interest is rolled up and you end up paying a higher overall payment at maturity.
“History tells us that companies with high debt repayment obligations, particularly those involving PIK notes, can get into real trouble in a market downturn if earnings are hit and they struggle to service the debt.”
