RE: Take over battle3 Jun 2023 14:55
Asos’s banks, which included HSBC and Lloyds, were getting nervous about the outlook for the retail sector and convincing them to refinance the loan would be difficult, sources say.
Nevertheless the Asos board did convince its lenders to extend a July 2024 maturity of loan to November 2024 – a move partly to satisfy the company’s auditors that the company was a going concern.
But Lindemann and Jose Calamonte knew this was an interim measure. The solution, the board concluded, was to opt for an “alternative” lender to provide specialist financing when terms cannot be agreed with traditional corporate banks.
One such financing house was Bantry Bay. It had stepped in to save Superdry and Matalan over the last year, and was selected by the board to refinance the loan. But in early May, there was a snag, City sources say.
Bantry Bay’s sole backer – renowned Wall Street hedge fund Elliott – was not willing to sign off the full £350m. The Asos board was told only £275m would be available, those familiar with the talks claim.
Bantry Bay declined to comment – though its representatives have previously insisted that Elliott has no influence in the fund’s investment decisions.
Either way, the Asos board was left in an invidious position. The company was left £75m short.
Frasers, it is understood, was unaware of the negotiations with Bantry Bay. But the FTSE 100 company was all too aware of the difficult trading conditions and the peril facing the Asos board in relation to the £350m debt.
Michael Murray, Frasers’ chief executive and Ashley’s son-in-law, told Asos executives he had a solution and hastily convened a conference call with them on May 23.
In return for an additional 5pc stake in Asos, Frasers would invest immediately at the company’s prevailing share price. As part of this, closer cooperation was put forward by taking advantage of Frasers’ retail expertise.
Described as a “win-win” for both parties, the move would reassure other shareholders, staff, customers, credit insurers and suppliers. But this was not a takeover attempt, however, the Asos board was told.
The Asos board did not see it that way, however.
As stock markets closed on the evening of May 25, the company announced a £75m share placing with the option of a further £5m from retail investors. And as related parties, Holch Povlsen and Barker were in on the deal and fully signed up.
On the face of it, the announcement looked like a sensible decision.
Asos would not be subject to a series of restrictive banking covenants – rules that if broken would leave the company in default. The only exception to this was that a minimum level of cash reserves had been retained, bosses said.
But it would come at a cost. The £275m loan comes with an 11pc interest rate and adviser fees and interest payments will cost the company £45m in the second half of the year alone.
Despite its merits, the Asos board’s decision b
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