14 September 2022 Aston Martin Rights Issue

Aston Martin Rights Issue​

What do you need to know this week?

Last week, Aston Martin Lagonda, the publicly owned entity that manufactures James Bond’s favourite car, announced it will launch a rights issue to raise over £650m in cash to pay down its debt.

Aston Martin’s share price has steadily fallen over the past few years, and since the beginning of 2022, the value of its shares has decreased by more than 66%.

As the Financial Times reports, the key terms of the deal are as follows:



Nearly half of the rights issue is underwritten by Mercedes-Benz AG (which owns 17% of the voting shares) and the Kingdom of Saudi Arabia’s sovereign wealth fund, PIC.

Why is this important for your interviews?

Rights issues are one of the few ways overburdened companies can raise cash. Understanding why Aston Martin has opted for a rights issue rather than other forms of financing will show interviewers you appreciate how senior managers approach decision-making related to financing. If you are interested in public corporate work, this news article may be particularly apt for you.

Aston Martin’s management has cited several factors contributing to the firm’s disappointing performance as of late, including supply chain issues that have intensified since Russia’s invasion of Ukraine. Compared to other luxury car manufacturers, Aston Martin has been slow to develop its own sports electric vehicle.

The other considerable problem facing the luxury manufacturer is its disproportionately high debt load compared to its competitors. As the FT reports, it has £1.3bn in outstanding debt, much of which comes with high interest rates. The company’s debt load makes it difficult to raise cash through further debt financings, which would likely require a refinancing package that does not relieve the burden of servicing the high interest, especially considering how continued central bank interest rate hikes is making debt more expensive (because the interest rates increase).

By offering existing shareholders the option (but not the obligation) to acquire further shares at a steep discount (four shares for the price of one), a rights offering is one of Aston Martin’s most efficient means to raise further cash given debt financing is difficult and a traditional equity raise is out of the question due the market’s concerns about its wider performance. Shareholders that elect to exercise their options essentially take a punt on the car maker’s future performance.

Management states that in addition to paying down outstanding debt, half of the proceeds will go into producing new models including an EV line.

How is this topic relevant to law firms?

As The Lawyer reports, Freshfields is Aston Martin’s principal adviser, with Linklaters coordinating the financial sponsors and banks orchestrating the rights issuance.