Asos has announced the successful refinancing of the majority of its £500m debt due in 2026, with only just over £70m outstanding.
The online fast-fashion retailer, which has struggled with post-pandemic shopping trends, had £500m in convertible bonds due 2026.
The London-headquartered company has now exchanged £253m into convertible bonds due in 2028 rather than 2026, in addition to repurchasing £173.4m of the convertible bonds due 2026.
Of the initial £500m in convertible bonds due 2026, £73.5m remains.
Convertible bonds refer to debt which the holder can swap for a fixed number of shares of the issuing company if they choose to. If the shares don’t perform well, the bond is repaid in full to the issuer.
Traditionally popular with high-growth start-ups, the use of convertible bonds has trickled into main markets recently.
Investors are unlikely to want to swap their bonds for shares, though, with Asos’ share price down more than 84 per cent in the last five years.
Why does Asos have so much debt?
In the last few years, the online fashion seller has been struggling to turn around the business after a boom in online shopping during the pandemic by selling off piles of unwanted stock and attempting to improve its fashion credentials. Like other businesses, it has also struggled with weak demand and high inflation.
Its latest trading update suggested that full-year sales will be down around 15 per cent for the full year, although earnings before interest, tax, depreciation and amortization will be at at the upper end of the consensus range of £20m to £75m.
“Ahead of the Covid-19 crisis fast-paced expansion and a lack of management bandwidth combined to cause creative missteps, warehouse issues and, ultimately, slowing demand and lower profitability,” analysts at JP Morgan said.
“This legacy continues to weigh on investors’ confidence in the group to recover from the current issues it is facing in rebuilding margin and cash generation,” they added.
Its sale of Topshop into a joint venture with Heartland, announced last week, should also “ease the cliff edge” the company faces on its debt, AJ Bell analyst Russ Mould said.
Asos said the deal reduced its net debt position by another £150m.