Aston Martin Shares Fall After New Rights Issue Announced

By Scott Kanowsky 

Investing.com -- Shares in Aston Martin Lagonda Global Holdings PLC (LON:AML) fell on Monday after the sports car maker confirmed plans to move ahead with a fresh £575.8M rights issue heavily backed by the Saudi Arabian sovereign wealth fund to help pay off debt and support future growth.

In a statement, the UK-based automaker announced a four-for-one issuance of 559M new shares priced at 103 pence per share - a discount of 78.5% compared to the stock's closing price on September 2.

The move, which is being supported by a group of investors that include Saudi Arabia's Public Investment Fund, still requires approval from shareholder at a general meeting scheduled for Thursday.

The PIF will take a 16.7% stake in Aston Martin through a £78M equity placing, granting it two board seats.

Aston Martin added that it has "irrevocable commitments" from the PIF, as well as Mercedes-Benz AG (OTC:DDAIF) and owner Lawrence Stroll's Yew Tree Consortium to take their full entitlements, amounting to 44.7% of the total rights issue.

The company said earlier in July that it hopes to raise £653M in fresh investment from the rights issue, with up to half of the proceeds being used to repay existing debt and improve cash flow generation.

"[T]he COVID-19 pandemic did have a significant detrimental impact on the business in 2020 which led to a refinancing at the end of that year. This refinancing left the Group with a significant debt burden and associated interest costs, something which the Capital Raise seeks to address," Aston Martin said.

According to the firm's half-year results released in July, net debt at the firm totaled just under £1.27B, while free cash outflow came in at £234M.