(Sharecast News) – Troubled online car seller Cazoo has agreed a debt-for-equity swap with its bondholders and is now recommending shareholders support the plan.
The UK based firm, which is listed in New York, said it agreed $630m (£509m) of convertible notes will now be cancelled in exchange for $200m of new senior secured debt and new equity.
Cazoo said the proposed reduction of debt through the deal would be “beneficial to the company’s future”. It also revealed that it had received a written notice from the New York Stock Exchange (NYSE) for failing to meet its rules on market capitalisation that prevent firms from having an average value below $50m for a consecutive 30 trading-day period.
Last year, Cazoo cut hundreds of jobs and axed its used car markets in the European Union amid efforts to improve its finances.
“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,” said Alex Chesterman, founder and executive chairman.
“As our results for the first half of this year show, we are making good progress on improving our unit economics and reducing our fixed costs, bringing us closer to our objective of achieving profitable growth and capturing a higher share of the significant UK used car market.”
“Cazoo’s stronger balance sheet, if the transactions are implemented, is expected to strengthen our ability to raise additional finance and the deleveraged capital structure will enable us to explore potential strategic initiatives to complement the Cazoo business model and brand.”
Reporting by Frank Prenesti for Sharecast.com