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Aston Martin plans to raise £210mn by placing fresh shares in order to pay down a high-interest portion of debt that has hamstrung the business financially for the past three years.
In 2020, Aston took out a $100mn tranche of borrowing that came with a 15 per cent coupon and included a “payment in kind” element, a condition normally attached when investors believe the business will not have enough cash to make the full payment.
The move gave it much-needed financial breathing room at a time of poor sales and the collapse of its share price following its 2018 IPO, but lumbered the luxury-car maker with hefty payments every quarter that sapped its profitability.
Last week Aston reported a £142mn pre-tax loss for six months, including £56mn of cash interest payments during the period. The company had £846mn of net debt at the end of June, of which the high-interest tranche was worth £186mn.
Aston on Monday said the money raised from the share sale will be used to buy back this portion of debt “by early November 2023”. This “will enable the company to operate with increased financial flexibility and improve free cash flow generation by reducing its interest costs”.
The move also helps Aston cash in on a strong run in its share price, which has quadrupled since last October.
Aston’s largest investors, including the Yew Tree consortium led by owner and chair Lawrence Stroll, as well as China’s Geely, Saudi Arabia’s sovereign wealth fund PIF, and Mercedes-Benz, have together offered to buy £115mn of the shares. Yew Tree has underwritten a further £69mn of the share offering.
Monday’s deal is the latest in a string of fundraisings by Aston, as it tries to wrestle back to profitability. The company brought in PIF last year through a right-issue in order to deal with part of its high-interest debt.
The latest deal should, if paid in full, clear the remainder of the debt, though the business still has a significant remaining debt pile paying 10.5 per cent interest.
Stroll, who once complained about “the God-damned debt” holding back the business, said the share offering would “accelerate the pathway we have been on to deleverage our balance sheet and become sustainably free cash flow positive”.
The company is projecting that a new range of sports cars and high-price special models as well as lower interest payments, will help the business return to underlying profitability in the coming years. The business aims to have free cash flow by 2024, as well as balancing debt and earnings by 2027.