Carmaker turns to a new bond
Press Association reporter ASTON Martin, the favourite car maker of a certain fictional secret agent, has been forced to turn to a different kind of bond, raising £121m to boost its struggling financial position.
The UK-listed business has been struggling to hit targets in recent months but bosses hope to use the extra cash to help develop and build its first SUV – the DBX – at its new factory in St Athan in the Vale of Glamorgan, where it plans to create up to 1,000 jobs.
However Aston Martin will now be under extra financial pressure, as the bonds come with a 12% interest rate paid each year until April 2022.
At that point, the company must repay the full amount.
Shares dropped more than 5% in early trading yesterday.
It listed on the stock market a year ago at 1,900p a share, but suffered a shock profit warning in June and heavy criticism after the float costs were revealed to be £136m.
The high rates come after ratings agency Moody’s cut Aston Martin’s credit rating, blaming a “lack of progress in terms of volume growth and profitability for 2019”.
Mark Wilson, Aston Martin Lagonda chief financial officer, said: “At the (half year) results we highlighted that we expected macro-economic 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.
“Aston Martin’s first SUV [Sport Utility Vehicle], the DBX, remains operationally on track and we are very pleased with the reception the car received at Monterey Car Week during August.”
He added that demand for its £2.5m Valkyrie hyper car sold out – 150 were built – and there is “excess customer demand” for its £1m Valhalla cars.
Russ Mould, investment director at AJ Bell, said: “The car manufacturer is known for its high end prices and that situation now also applies to its debt.
“Aston Martin is taking on $150m of extra borrowing with a 12% interest rate, as well as an option to have another 100 million US dollars at 15%.
“These rates are very high and are a major red flag that investors consider the car company to be a high-risk entity.”