Aston Martin $150m bond issue a success; analysts wary on borrowing costs
Luxury car maker Aston Martin Lagonda said it had successfully raised $150m from a bond issue, with an option for a further $100m, but analysts expressed caution on high borrowing costs.
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The bonds come with interest of 12% and 15% respectively as chief financial officer Mark Wilson said the financing deal would provide flexibility in the face of "macroeconomic headwinds and uncertainty".
"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," he said in a statement.
"The conditions on the delayed draw notes are well within our order expectations. 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."
The company also said that based on its performance since 30 June and despite continuing pressure on sales volumes, it expected to meet current analyst consensus for key financial metrics for fiscal 2019.
AJ Bell investment director Russ Mould said: "The car manufacturer is known for its high end prices and that situation now also applies to its debt."
"These rates are very high and are a major red flag that investors consider the car company to be a high risk entity.
"Metro Bank couldn’t get enough support for its bonds earlier this week at 7.5% despite investors around the world scrambling for new sources of income in a low interest rate environment. So Aston Martin pricing its debt at up to twice this level would suggest it really needs the money and has had to bow to investors’ demands."
"In such situations, investors have the upper hand and demand a high level of reward to compensate for the risks they are taking."
At 0950 BST, the shares were down 5.4% at 543.96p.