A group of Aston Martin creditors owed £1.3 billion has warned Aston Martin Lagonda Global Holdings PLC that it will pursue legal action if the carmaker proceeds with a branding rights sale tied to its latest debt financing, according to a Financial Times report on Monday.
The creditors sent a letter before action to the board on Sunday, reserving the right to seek to unwind the £550 million facility agreed with HPS Investment Partners and to block the transfer of intellectual property to Authentic Brands Group.
The financing, secured in July and led by funds managed by BlackRock-owned HPS Investment Partners, comprises a £450 million secured term loan, a £100 million delayed draw term loan and a further £100 million permitted debt incurrence facility.
An additional £100 million tranche is conditional on Aston Martin Lagonda Ltd completing a transfer of a 50.1% stake in its non-automotive intellectual property to Authentic Brands Group, in which HPS also holds an investment. Aston Martin has declined to disclose the full terms of the HPS arrangement to some of its creditors, who say they learned of the branding transaction only after the financing had closed.
Restructuring lawyers advising bondholders and secured lenders will recognise the dispute as a familiar test of consent and disclosure obligations in distressed financings.
Where a debtor transfers valuable intangible assets outside the perimeter disclosed to existing creditors, those creditors typically look to intercreditor agreements and event of default provisions to challenge the transaction, the kind of instruction restructuring teams at firms such as Herbert Smith Freehills and Pinsent Masons handle regularly for secured lenders.
Counsel acting for the £1.3 billion creditor group will need to establish standing under the existing facility documentation before any application to the English courts, and will face scrutiny over whether the letter before action reflects a genuine litigation threat or a negotiating position aimed at forcing disclosure.
Aston Martin Lagonda Global Holdings PLC, listed on the London Stock Exchange under the ticker AML.L, has posted consecutive annual losses as tariffs in the US and softening Chinese demand compound weak sales at home. The HPS facility was designed to buy the manufacturer time rather than resolve its underlying cash position, following two years of cost-cutting under chief executive Adrian Hallmark.
A contested unwinding of the Authentic Brands transaction would strip out part of that funding at a point when the company has limited alternative sources of capital, and would test how far secured creditors can reach into a debtor’s intellectual property disposals once a financing has already closed.
Aston Martin Lagonda Global Holdings PLC now faces a choice between disclosing the terms of the HPS arrangement to the wider creditor group and defending the transaction if the £1.3 billion group pursues its threat through the English courts.