Aston Martin's creditors have threatened to take legal action against the automaker after learning of its plan to sell a portion of its brand and naming rights as part of a disputed £550 million debt financing deal. The cash-strapped company announced last month that it had secured a financing package with HPS, a private credit arm of BlackRock, consisting of a £450 million term loan and an additional £100 million facility available for future drawdown.
Existing creditors, who hold a combined £1.3 billion in debt, are united in opposing the financing. They argue that the transaction removes certain assets from the pool accessible to creditors, violating key terms of Aston Martin's existing debt agreements. The bondholders sent a pre-action letter to Aston Martin's board on Sunday, warning they may sue the company in court to seek the cancellation of the HPS financing deal and prevent the disposal of related intellectual property assets.
Aston Martin has consistently refused to disclose the specific terms of its agreement with HPS, leaving creditors completely in the dark about the deal's details. However, according to sources familiar with the matter, creditors have discovered that one of the conditions for the financing is the transfer of a 50.1% stake in the company's so-called non-automotive intellectual property to Authentic Brands, a US brand management firm. The sources added that HPS holds an investment stake in Authentic Brands, and Aston Martin's ability to draw down the additional £100 million credit facility hinges entirely on the successful completion of this brand rights transfer.
Existing creditors have already raised objections to the financing plan, stating that it moves assets out of the collateral pool to secure the interests of the new lender HPS, without even offering existing creditors the chance to provide new financing to the company. They believe the combination of new financing and intellectual property sale would significantly dilute the value of their own collateral and directly breach the terms of the loan agreements. Although Aston Martin has stated that the new loan from HPS is "secured by certain assets held by a newly established subsidiary of the Group and certain other assets," it has consistently refused to disclose to bondholders which specific collateral has been removed from the creditors' recovery pool.
During last week's earnings call, the company also avoided revealing deal details when pressed by equity analysts. Chief Financial Officer Doug Lafferty defended the financing plan, calling it "critical to the overall development of the company." Earlier this year, Aston Martin raised £50 million by selling brand naming rights to its namesake Formula 1 team. The sale of brand rights to AMRGP Holdings, the holding company of the F1 team, effectively amounted to an injection of funds from Lawrence Stroll, who indirectly controls the AMR entity. The company disclosed that the sponsorship deal resulted in approximately £19 million in "net marketing expenditure" 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 holds a minority stake in AMR, did not respond to requests for comment, and Aston Martin also declined to comment.