Asos taps shareholders for £80m and borrows £275m as online fashion retailer looks to turn fortune after £290m loss
- Asos said it successfully raised £75 million from institutional investors
- It has also launched a £5 million capital raise aimed at retail investors
- And it took a £200 million loan and entered into a £75 million revolving credit facility
Asos raises £80m from shareholders and borrows £275m as the online fashion retailer looks to bolster its balance sheet after losing £291m in the first half.
The former stock darling launched a capital raise last night and today said it had successfully raised £75 million from institutional investors including Anders Povlsen’s Bestseller Group and US hedge fund Camelot Capital Partners.
It also launched a £5 million capital raise aimed at retail investors through its PrimaryBid platform.
Asos intends to use the money “to return the company to sustainable profitability and cash generation in the second half and beyond.”
Cash call: Asos raises £80 million from shareholders and borrows £275 million
Meanwhile, it also took out a £200m loan and entered into a £75m revolving credit facility with Bantry Bay Capital, the specialist lender that has recently financed struggling retailers Matalan and Superdry.
The new loan, which runs until April 2026, comes with an average annual interest rate of about 11 percent.
AJ Bell’s investment director, Russ Mould, said Asos may use most of the money raised to pay off interest and will soon have to turn to shareholders for more.
“The fast fashion online retailer hopes to lay a solid foundation for the recovery of the company,” he says.
However, with the company paying high interest rates on its newly agreed debt, much of the money raised from shareholders will go almost immediately to pay off its loans.
“The danger is that ASOS hasn’t raised enough this time, either by choice or necessity, and will soon have to dig out the begging bowl again.
“After all, the company does not generate free cash flow and the prospects for this to happen soon do not look too encouraging.”
Asos and other online fashion retailers have thrived during the pandemic thanks to shopping moving almost entirely online.
But that situation has now reversed, exposing the company to a difficult combination of rising costs and shrinking demand, as well as increased competition.
Asos stocks have lost more than 70 percent of their value in the past year. They fell 2.4 percent during afternoon trading on Friday to 408p.
Earlier this month it reported a loss of £290.9m for the six months to the end of February – much worse than its loss of £15.8m in the same period a year earlier.
Asos also gave a more pessimistic forecast for a low double digit drop in sales in the second half of the year after an 8 percent drop in the first half.