Aston Martin creditors threaten legal action over planned brand-rights sale
Aston Martin creditors have threatened to sue the automaker after learning that it plans to sell part of its brand and naming rights as part of a disputed £550 million financing deal. The cash-strapped automaker announced last month that it had agreed on a financing package with private-credit firm HPS. The package includes a £450 million term loan and an additional £100 million facility that can be drawn later as needed. Existing creditors, who hold a combined £1.3 billion in claims, are collectively opposing the financing. They argue that the transaction would move some assets outside the pool available to creditors for recovery, violating core provisions of Aston Martin's existing debt agreements. The bondholders sent a letter before action to Aston Martin's board on Sunday, warning that they may take the company to court. They are seeking to unwind the financing arrangement with HPS and block the disposal of the relevant intellectual-property assets. Aston Martin has repeatedly refused to disclose the specific terms of its transaction with HPS, leaving creditors unable to determine the details of the agreement. People familiar with the matter said creditors have established that one condition for completing the financing is the transfer of a 50.1% stake in the automaker's so-called non-automotive intellectual property to U.S. brand-management company Authentic Brands. The people said HPS holds an investment stake in Authentic Brands, and that Aston Martin's ability to draw the additional £100 million facility depends entirely on whether the brand-rights transfer is completed successfully. Existing creditors had already objected to the financing plan. They say it removes assets from the collateral pool to protect new lender HPS, while the existing creditors were not even given the opportunity to provide new financing to the company. The creditors contend that combining the new financing with the intellectual-property sale would significantly dilute the value of their collateral and directly breach the terms of the lending agreements. Aston Martin has said the new HPS loan is secured by "some assets held by newly established subsidiaries of the group and certain other assets." However, the company has continued to refuse to tell bondholders which collateral was removed from the pool available to creditors for recovery. During last week's earnings call, the automaker also declined to disclose details of the transaction in response to questions from stock analysts. Chief Financial Officer Doug Lafferty defended the financing, calling it "critical to the overall development of the company." This year, Aston Martin raised £50 million by selling naming rights to the identically named Formula One team. The rights were sold to AMRGP Holdings, the holding company of the F1 team, in a transaction that was effectively an injection of capital from Lawrence Stroll, who indirectly controls AMR. The automaker disclosed that related sponsorship generated about £19 million in "net marketing expense" during the first half of the year. In other words, after selling the naming rights, Aston Martin had to pay AMR to continue using its own brand name. HPS, which also owns a minority stake in AMR, did not respond to requests for comment. Aston Martin also declined to comment.
The cash-strapped automaker announced last month that it had agreed on a financing package with private-credit firm HPS. The package includes a £450 million term loan and an additional £100 million facility that can be drawn later as needed.
Existing creditors, who hold a combined £1.3 billion in claims, are collectively opposing the financing. They argue that the transaction would move some assets outside the pool available to creditors for recovery, violating core provisions of Aston Martin's existing debt agreements.
The bondholders sent a letter before action to Aston Martin's board on Sunday, warning that they may take the company to court. They are seeking to unwind the financing arrangement with HPS and block the disposal of the relevant intellectual-property assets.
Aston Martin has repeatedly refused to disclose the specific terms of its transaction with HPS, leaving creditors unable to determine the details of the agreement.
People familiar with the matter said creditors have established that one condition for completing the financing is the transfer of a 50.1% stake in the automaker's so-called non-automotive intellectual property to U.S. brand-management company Authentic Brands.
The people said HPS holds an investment stake in Authentic Brands, and that Aston Martin's ability to draw the additional £100 million facility depends entirely on whether the brand-rights transfer is completed successfully.
Existing creditors had already objected to the financing plan. They say it removes assets from the collateral pool to protect new lender HPS, while the existing creditors were not even given the opportunity to provide new financing to the company.
The creditors contend that combining the new financing with the intellectual-property sale would significantly dilute the value of their collateral and directly breach the terms of the lending agreements.
Aston Martin has said the new HPS loan is secured by "some assets held by newly established subsidiaries of the group and certain other assets." However, the company has continued to refuse to tell bondholders which collateral was removed from the pool available to creditors for recovery.
During last week's earnings call, the automaker also declined to disclose details of the transaction in response to questions from stock analysts. Chief Financial Officer Doug Lafferty defended the financing, calling it "critical to the overall development of the company."
This year, Aston Martin raised £50 million by selling naming rights to the identically named Formula One team. The rights were sold to AMRGP Holdings, the holding company of the F1 team, in a transaction that was effectively an injection of capital from Lawrence Stroll, who indirectly controls AMR.
The automaker disclosed that related sponsorship generated about £19 million in "net marketing expense" during the first half of the year. In other words, after selling the naming rights, Aston Martin had to pay AMR to continue using its own brand name.
HPS, which also owns a minority stake in AMR, did not respond to requests for comment. Aston Martin also declined to comment.