Aston Martin Owners Hinder Access to Stock Market for New Cash
Aston Martin Owners Hinder Access to Stock Market for New Cash
(Bloomberg) --
A weakening of powers held by the management of Britain’s most famous luxury car company has made it harder for the firm to raise much-needed capital.
Aston Martin Lagonda is spending money --about 162 million pounds ($208 million) on capex in the first half of 2019 -- as it channels resources into the launch of its DBX, a high-end SUV scheduled for release in Beijing later this month. Analysts including Bank of America Merrill Lynch say the company, which publishes earnings on Thursday, may need to sell new shares to shore up its balance sheet, particularly after its last use of the debt market saw investors demand a punitive 12% interest.
That may not be so simple.
At its annual shareholder meeting in June, the company restricted management’s power to issue stock of up to 5% of its equity without shareholder approval. The move, which followed discussions with shareholders, went largely unnoticed outside company circles at the time but may complicate future efforts to raise funds for ongoing operations. Aston Martin’s market capitalization is about 984 million pounds, according to data compiled by Bloomberg.
“One astonishing aspect of the Aston story is the apparent decision to take away the company’s ability to raise equity easily,” Max Warburton, equity analyst at Bernstein said in a note to clients last Tuesday.
Aston Martin’s main shareholders, private equity groups Investindustrial and Adeem, control a combined 61% according to analysts at Bernstein.
Officials at Aston Martin and Investindustrial declined to comment. Representatives for Adeem didn’t respond to a request for comment.
Luxury SUV
Aston Martin’s investors have gone through turbulent times and its shares, which listed last year at 19 pounds, currently trade at about 420 pence, according to data compiled by Bloomberg.
Aston Martin’s adjusted indebtedness almost doubled in the first half of this year to 4.7 times earnings, according to its last results statement. Capital expenditure rose 10 million pounds from the prior year to 162 million pounds, which the company attributed primarily to “near-term product launches.”
Much depends on the success of the new SUV, meanwhile. When Aston Martin raised debt in September at 12% interest, it also agreed with bondholders that it will gain access to a further $100 million of financing if it secures 1,400 orders on its DBX by June. The car will have a $189,900 U.S. price tag, the company said on Wednesday.
Even so, that new financing line has limited appeal. The company said it may issue the additional bonds for the extra money as unsecured debt which would further increase its funding costs to as high as 15%, Bloomberg reported in September.
“The company needs equity,” said Philippe Houchois, equity analyst at Jefferies who has a hold recommendation in the stock. “Aston Martin has a wrong capital structure.”
--With assistance from William Canny.
To contact the reporters on this story: Laura Benitez in London at lbenitez1@bloomberg.net;Irene García Pérez in London at igarciaperez@bloomberg.net
To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Chris Vellacott
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