Monday 21 October 2019

Aston Martin turns to a new bond to avoid running out of road

The luxury car maker has raised 150 million dollars in a bond issue. But the interest is 12%.

Aston Martin will use £121m to develop its SUV, but the interest rate for the money is 12% (PA)
Aston Martin will use £121m to develop its SUV, but the interest rate for the money is 12% (PA)

By Simon Neville, PA City Editor

Aston Martin, the favourite car maker of a certain fictional secret agent, has been forced to turn to a different kind of bond, raising 150 million US dollars (£121 million) 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.

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.

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Aston Martin will use the money to finish off development of its first SUV, the DBX (Aston Martin / PA)

Shares dropped more than 5%, down 29.4p to 545.4p. 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 £136 million.

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 macroeconomic 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, the DBX, remains operationally on track and we are very pleased with the reception the car received at Monterey Car Week during August.”

These rates are very high and are a major red flag that investors consider the car company to be a high-risk entity Russ Mould, AJ Bell

He added that demand for its £3 million Valkyrie hyper car sold out – 150 were built – and there is “excess customer demand” for its £1 million 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 150 million dollars 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.”

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