The company, listed on the NYSE, has been in talks with its shareholders for several months following concerns that it may become liable to repurchase the $630 million of convertible notes, should it shares fall to a level where it could no longer trade on the NYSE.
The debt restructuring package has now been agreed and was announced at 7am EST. The deal enables Cazoo to continue operating on the NYSE for now. It means U.S. fund Viking Global Investors is Cazoo’s largest shareholder.
The transaction means the $630 million of convertible notes are to be cancelled in exchange for providing Cazoo with a further $200 million of new borrowing facilities.
The new deal means the company has materially reduced its debt and improved its capital structure.
In its FY 2022 results, Cazoo disclosed that it may struggle to continue as a going concern. The company said that it might need extra capital to continue its business but admitted that “such capital may not be available to us, and therefore our business, operating results and financial condition may be materially adversely affected.”
In its statement, Cazoo said the material debt reduction “is beneficial to the company’s future.” It said deleveraging will “reduce the company’s current debt overhang and is expected to improve its financial flexibility to support its return to growth.”
The statement went on to say the deal “should improve the company’s ability to meet the NYSE continued listing standards.”
This latest development at least delays that risk and signals that investors continue to support the business, at least for now.
There is now speculation that this latest change may lead to the departure of founder Alex Chesterman, who has already stepped down from the CEO role.
The company also said that its board will be reduced from eight members to seven members, with six members to be selected by the convertible notes owners and one to be chosen by Cazoo’s current board of directors.
“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 of Cazoo.
“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.”