Cazoo enters administration

August 2024 | DEALFRONT | BANKRUPTCY & RESTRUCTURING

Financier Worldwide Magazine

August 2024 Issue

UK online used car platform Cazoo collapsed into administration in May following a period of restructuring which began in late 2023.

Since the restructuring process began, Cazoo has sold some parts of its businesses and other assets to provide funds for creditors.

More than 700 people have already lost their jobs as a result of the crisis at Cazoo, with the appointed administrators – Teneo – expected to retain a number of staff to operate the remaining marketplace model while they explore a sale. According to insolvency practitioners from Teneo, approximately 208 Cazoo employees will keep their jobs while they wind down the business until it is sold.

Teneo was appointed just over a week after Cazoo filed to seek temporary protection from its creditors. Confirming its plans for Cazoo, the administrators said: “Following our appointment, we continue to progress discussions with a number of interested parties on the Marketplace business and remaining customer collections centres.”

Cazoo declined to comment on the filing, but just a week prior to its collapse noted: “Our new marketplace model, where consumers can both buy and sell cars, is revenue generating and performing ahead of expectations with interest from almost 100 car dealers including many household names wishing to trade on the Cazoo platform.” The company added that it had “successfully restructured and significantly reduced the cash burn of the group”.

The company officially launched in December 2019 as an online retailer of used cars which it delivered direct to customers with its own fleet of liveried vehicles. At its peak, Cazoo was valued on the New York Stock Exchange (NYSE) at £5bn.

Prior to its merger with a special purpose acquisition company (SPAC) which took it public, the company raised hundreds of millions of pounds from investors including the ventures arm of the Daily Mail publisher, the Abu Dhabi sovereign wealth fund Mubadala and General Catalyst, a leading tech investor. Following its listing on the NYSE, the company embarked upon an ambitious growth plan which saw it expand into Europe, reaching a total of 4500 employees. Cazoo also added a UK retail network by acquiring car supermarket businesses and spent millions on advertising campaigns and sport sponsorship deals.

However, in 2020 it reported a £102.7m loss and then a £329m loss in 2021. In 2022 it announced extensive cuts, including closing its operations in mainland Europe, but by the end of 2023 recorded a £704m loss. After refinancing its debts at the end of 2023, in March 2024 Cazoo announced its business would change from being an online retailer of used cars to listing stock for dealers instead.

The administration process will allow Teneo to focus on a sale, with the marketplace model having drawn interest from a number of potential suitors. In late May, the group’s wholesale business was sold to G3, another industry player, with Constellation Automotive, the owner of Cazoo’s rival, Cinch, also having acquired a number of the company’s assets. Among the assets which have been sold are its vehicle fleet, believed to have achieved higher than anticipated values, reflecting a shortage of used cars in the market at present.

The company’s founder Alex Chesterman stepped down as chief executive to become Cazoo’s chair in 2023, after a $630m debt-for-equity swap was announced which saw Viking Global Investors, a US-based fund, become Cazoo’s biggest shareholder. Mr Chesterman resigned from the firm entirely in December.

By March this year, Cazoo announced further restructuring, including the sale of a car repair centre in Bedfordshire and customer collection centres in Birmingham and Bristol in the UK, and a desire to focus solely on its online buy-and-sell platform. In a recent US filing, Cazoo said that it was “in the best interests of the company and its stakeholders to commence the winding up of the company”.

Cazoo announced plans to hold an extraordinary meeting with shareholders on 6 June to approve the winding-up.

Richard Summerfield