Cazoo braces for collapse into administration as rescue deadline expires
The London-headquartered online car retailer, which is listed in New York, signalled its intention to enter administration on 8 May.
That move gave Cazoo ten working days in order to find a rescue deal or be forced to appoint administrators.
Morning Wire understands that administrators at Teneo are set to be appointed later today.
Cazoo, which was once worth more than £5bn, was founded in 2018 by Alex Chesterman.
The move comes after Cazoo announced a major change to its business model, plans to cut jobs and the departure of its chief executive in March.
At the time the company said it would remain listed on the New York Stock Exchange “until at least March 20” but that it has no obligation to continue to be so after that date.
In a statement, Cazoo said it intended to transition to a marketplace business model, exit its fulfilment operations and reduce its headcount to focus on its e-commerce technology platform, proprietary data, brand, and digital marketing and commercial functions.
The firm has also announced that Paul Whitehead will step down as chief executive at the end of that month and will remain with the business until at least the middle of May as a strategic advisor.
It has been reported that more than 700 people have lost their jobs at Cazoo as a result of the crisis.
A number of employees are expected to be retained by Teneo to operate its marketplace model while a sale is explored.
A collapse into administration would come after Cazoo’s wholesale arm was sold to G3 while Constellation Automotive, the owner of rival, Cinch, has also acquired a number of assets.
John Bringardner, head of Debtwire, said: “The extreme fall in the valuation of British used car company Cazoo is yet another unfortunate example of a company that took advantage of the SPAC frenzy in 2020 – 2021, managing to secure financing and go public, only to end up restructuring.
“Recent Debtwire data found that default rates among de-SPAC companies are double that of other speculative-grade corporations which speaks to the shaky financial foundations of former tech darlings in their rush to public market exits.
“Cazoo’s downfall follows the path of its US counterpart, Carvana, which eventually managed to secure $5.5 billion in external funding in one of the largest distressed debt exchanges of 2023.
“Cazoo now desperately needs to pull off something similar, as the pressure to raise additional capital before the beginning of the second half of 2024 in order to satisfy its liquidity needs, is immense.
“Still, much like Carvana, even if it can successfully restructure its debt, the fix may still prove to be more of a band-aid than a long-term solution.”
David Kendrick, partner at UHY Hacker Young, added: “Cazooo had been teetering on the brink for some time now and it was only a matter of time before cash ran out.
“The model was flawed from day one and it was far too late before they got enough senior expertise from the car dealership industry.
“Although they had management expertise from other areas of ecommerce, they started without enough genuine understanding of how the car market and car dealers work. That meant they underestimated the wants of the consumer, the challenges around national delivery and the strength of the local car dealer market.
“They left it too late before they started to trying to adjust their model.
“All of these factors have contributed to Cazoo’s downfall and billions of pounds of investor money burnt. A sad story and one that has simply created a brand name and not much else.”