Shares in embattled James Bond carmaker Aston Martin Lagonda (AML) zoomed ahead 20% today to 483p after announcing a £500m rescue deal led by billionaire Formula 1 tycoon Lawrence Stroll.
Canadian businessman Stroll, who owns the Racing Point F1 team which his son Lance Stroll races for, will lead a consortium to take up £182m of new shares at £4 each, after which the firm will issue a further £318m of new shares once the full year results have been published.
It will give Stroll and his consortium a 20% stake in the business, with the billionaire set to become executive chairman. As such, current chairman Penny Hughes will step down.
The firm recognised this means it will not be fully compliant with the UK Corporate Governance Code, and added that further details on governance will be issued when it publishes its prospectus for the rights issue.
RESCUE DEAL 'NECESSARY' TO REDUCE DEBT
Aston Martin said the rescue deal will help the company ‘strengthen its balance sheet to necessarily and immediately improve liquidity and reduce leverage.’
It added, ‘This follows the disappointing performance of the business through 2019 resulting in severe pressure on liquidity exacerbated by the current high leverage.’
Earlier this month, the company issued a profit warning and said that full year earnings before interest, tax, depreciation and amortisation (EBITDA) will be 45% lower than expected.
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The struggling luxury carmaker expects full year profits to be between £130m and £140m following a tough end to the year, about half the £247m it made last year.
In that update, Aston Martin said the ‘challenging trading conditions’ it encountered in November had continued through the ‘peak delivery period of December’, resulting in the dreaded trio of lower sales, higher selling costs and lower margins.
But the real fear for investors has been Aston Martin’s debt. While the company has end of year cash of £107m on the books, its balance sheet looks very stretched with net debt ranging from £875m to £885m.
That exposes the group to leverage of between 6.2-times and 6.8-times, experts calculate, something that has seriously worried its bond holders and lenders.
ASTON MARTIN BRAND STILL HAS VALUE
Therefore today’s rescue deal will have come as a big relief to investors, with signs the business could finally be back on track.
AJ Bell investment director Russ Mould said Stroll’s rescue deal is a ‘reminder that the Aston Martin brand still has some value.’
He added, ‘Stroll is planning to use the Aston Martin name, with all its James Bond cachet, for his F1 team. This element of the transaction also implies a long-term commitment to the business.’
Mould also said following the departure of Hughes as chair, focus will fall on CEO Andy Palmer and ‘whether he is the right man to have behind the wheel as Aston Martin looks to find another gear.’
