Aston Martin Faces Investor Revolt Over Offshore Debt Deal
Luxury carmaker's bondholders threaten legal action over a 'secret' transfer of valuable brand assets to a Cayman Islands unit.
Aston Martin Lagonda is embroiled in a dispute with its investors over a controversial debt deal that involved transferring valuable naming and branding rights to an offshore unit in the Cayman Islands. The luxury car manufacturer's bondholders are threatening legal action, alleging the move was a "secret" maneuver to place assets beyond their reach.
The dispute centers on a deal with HPS, the private credit arm of fund giant BlackRock, which provided Aston Martin with a £450 million loan. As part of the agreement, 195 Aston Martin trademarks, including the iconic winged logo and the design of the DB5 model, were shifted to an offshore entity on July 30. The carmaker also has the option to draw another £100 million if it transfers a 50.1 percent stake in these trademarks to co-investor Authentic Brands.
Creditors, who are collectively owed £1.3 billion, claim they were blindsided by the deal and were not informed about the transfer of rights to Authentic Brands, a company that manages brands like Reebok and Ted Baker, as well as rights associated with Elvis Presley and Marilyn Monroe. Bondholders had reportedly offered cheaper funding, which they say was ignored by the board before the HPS deal was accelerated.
A source close to the creditors described the lack of transparency as "like private equity at its worst, really red in tooth and claw." They have sent a "letter before action" to the Aston Martin board, warning of potential proceedings to unwind the HPS deal, which they deem illegal and a deliberate attempt to put assets out of their reach.
Aston Martin defended the HPS deal, stating it "significantly" bolstered the company's financial position. A spokesperson said the board considered available financing options and selected the one deemed to be in the best interests of the company. They asserted that the transaction is fully permitted by existing bond financing agreements.
This situation unfolds as Aston Martin, a marque famously associated with James Bond, continues to struggle as a publicly listed company. Floated in 2018 at an equivalent of £36 per share, its stock has plummeted to around 35p, valuing the company at approximately £354 million. First-half losses widened to £154 million from £141 million a year prior, with total debts climbing above £1.5 billion.
Experts have questioned the viability of Aston Martin as a public entity. "Aston Martin makes no sense as a publicly listed company," said Simon Hirst, a lecturer in equity capital markets at Yale School of Management. Sources close to bondholders have also criticized the company's governance, stating, "They are nowhere complying with the corporate governance code" and that the firm is "constantly burning cash."
Further complicating matters is the influence of Canadian billionaire Lawrence Stroll, Aston Martin's executive chairman and largest shareholder. Stroll rescued Aston Martin with a £500 million deal six years ago and also owns the Aston Martin Formula 1 team, for which his son Lance is a driver. While Aston Martin has divested its stake in the F1 team, the carmaker incurred a £22 million "net marketing expense" last year for its sponsorship of the racing outfit. In February, Aston Martin raised £50 million by selling its F1 naming rights to Stroll, described as another cash injection.
Creditors have set a deadline for the resolution of this row. Failure to reach an agreement could lead to them seeking compensation or attempting to reverse the HPS deal, casting further uncertainty on the future of the iconic British carmaker.