Cazoo agrees restructuring deal with lenders to cut debts

Online car seller Cazoo has agreed a restructuring deal which will hand equity in the firm over to its lenders.

The firm, which was founded in the UK but listed in New York, revealed it has sealed a debt-for-equity swap on around 630 million dollars (£509 million) of debt.

It said it has swapped this debt with its lenders for 200 million dollars (£161.7 million) of new debt and equity stakes in the company.

Cazoo’s board of directors said the proposed reduction of debt through the deal would be “beneficial to the company’s future” as it recommended shareholders to vote in favour of the move.

The company was launched by Zoopla founder and serial entrepreneur Alex Chesterman in 2018 and rapidly grew.

However, the company has reported significant losses in recent years as it has invested heavily in marketing and sponsorships, such as sponsor deals with Aston Villa and Everton football clubs, to support its growth ambitions.

Last year, Cazoo cut hundreds of jobs and axed its used car markets in the European Union amid efforts to improve its finances.

Mr Chesterman, founder and executive chairman of Cazoo, said: “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.

“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.”