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Aston Martin’s creditors are threatening legal action against the carmaker after learning that the company plans to sell a portion of its branding and naming rights as part of a contentious £550mn debt-financing deal.
The cash-strapped company announced last month that it had secured the funding package with BlackRock-owned private credit firm HPS, comprising a £450mn term loan and a further £100mn that can be drawn in the future.
The deal has been challenged by a group of existing creditors owed £1.3bn, who argued that a financing deal placing assets beyond their reach breached key terms of Aston Martin’s existing debt.
The group of bondholders sent a “letter before action” to Aston Martin’s board on Sunday, warning that they may be required to file proceedings against the company, with the aim of unwinding the HPS transaction and blocking the disposal of certain intellectual property assets.
Aston Martin has refused to share details of its deal with HPS, leaving creditors in the dark about the agreement.
However, the creditors have learnt that part of the deal depends on the carmaker transferring 50.1 per cent of its so-called non-automotive intellectual property to US brand developer Authentic Brands, according to people familiar with the matter.
HPS is an investor in Authentic Brands, and the additional £100mn that could be drawn down from the private credit firm by Aston Martin is conditional on that branding rights transaction taking place, according to the people.
Existing creditors have already challenged the financing deal on the basis that it moved assets out of their pool of collateral in favour of Aston Martin’s new lender. The existing creditors were denied the opportunity to provide new financing to the company themselves.
The existing creditors believe the new financing deal and the disposal of its intellectual property rights would leave them with less valuable collateral and breach the terms of the lending agreement.
Although Aston Martin has said the new HPS financing was “secured against certain of the group’s assets situated in a newly incorporated subsidiary, together with certain other assets”, it has declined to explain to bondholders which collateral has been shifted outside their reach.
The carmaker also declined to reveal the details when it fielded questions from equity analysts on an earnings call last week. Aston Martin’s chief financial officer Doug Lafferty defended the deal as “important for the company as a whole”.
Aston Martin has already raised £50mn this year by selling the rights to use its name for the Formula 1 team that races under its name. The sale of branding rights to the F1 team’s holding company, AMR GP Holdings, in effect marked a cash injection from Lawrence Stroll, who indirectly controls AMR.
The carmaker said it incurred just over £19mn in “net marketing expense” for sponsorship in the first six months of the year. This is essentially Aston Martin paying AMR to use the name after selling the rights.
HPS, which is also a minority shareholder in AMR, did not respond to a request for comment.
Aston Martin declined to comment.
