Asos is raising £80million from shareholders and borrowing £275million as the online fashion retailer looks to shore up its balance sheet after slumping to a £291million loss in the first half.
The former stock market darling launched an equity raise last night and today said it had successfully raised £75million from institutional investors, including Anders Povlsen’s Bestseller Group and US hedge fund Camelot Capital Partners.
It also launched a £5million equity raise aimed at retail investors through platform PrimaryBid.
Asos plans to use the funds ‘to return the business to sustainable profitability and cash generation’ in the second half and ‘beyond’.
Cash call: Asos is raising £80m from shareholders and borrowing £275m
Meanwhile, it also took on a £200million loan and entered a £75million credit revolving facility with Bantry Bay Capital, the specialist lender which has recently financed struggling retailers Matalan and Superdry.
The fresh borrowing, which goes through to April 2026, comes with an average annual interest rate of around 11 per cent.
AJ Bell’s investment director, Russ Mould, said Asos may end up using most of the cash raised to pay off interest and may soon have to tap shareholders again for more.
‘The fast fashion online retailer hopes this can create a solid base for the company’s recovery,’ he said.
‘However, with the company paying high rates of interest on its newly agreed debt, much of the money raised from shareholders will almost immediately be going out the door on servicing its borrowings.
‘The danger is ASOS hasn’t raised enough this time round, either through choice or necessity, and it will have to dig out the begging bowl again before too long.
‘After all, the company is not generating free cash flow and the prospects of it doing so soon do not look too encouraging.’
Asos and other online fashion retailers did well during the pandemic thanks to shopping moving almost entirely online.
But that situation has now reversed leaving the company exposed to a difficult combination of rising costs and shrinking demand, as well as mounting competition.
Asos shares have lost over 70 per cent of their value over the last year. They were down 2.4 per cent to 408p in afternoon trading on Friday.
Earlier this month, it reported a £290.9million loss for the six months to the end of February – far worse than the £15.8million loss in the same period a year earlier.
Asos also provided a more pessimistic forecast for a ‘low double digit’ sales decline in the second half of the year after seeing an 8 per cent drop in its first half.