Lenders to Cazoo, the British-based online car retailer, will take control of the company’s shares as part of a deep financial restructuring expected to be announced within days.
Sky News has learnt that Cazoo was on Tuesday putting the finishing touches to a $630m debt-for-equity swap that will leave Viking Global Investors, a US-based fund, as its biggest shareholder.
Sources close to the car retailer's bondholders said an agreement could be announced in New York, where it is publicly traded, this week and potentially as early as Wednesday.
The transaction, which will also involve $200m of new borrowing facilities being put in place, is designed to place Cazoo on a sustainable long-term footing after two turbulent years as a listed company.
The business, founded and run by the Zoopla founder Alex Chesterman, one of Britain's most successful entrepreneurs, rapidly scaled its profile by sponsoring prominent sports teams such as Aston Villa and Everton, the Premier League football clubs.
It also signed deals to attach its brand to darts and snooker, among other sports.
The debt restructuring is expected to raise questions about Mr Chesterman's future, with one debtholder saying on Tuesday evening that he could step down as chair once the new capital structure is in place.
One noteholder said that while shareholders faced pain from enormous dilution of their interests, they would be better-placed because the company would have a balance sheet positioned for future growth.
It would also reduce cash interest costs on Cazoo's remaining debt while giving existing shareholders warrants based on its future performance.
The deal is understood to be subject to approval from remaining bondholders as well as shareholders.
Since its launch in late 2019, Cazoo has sold more than 150,000 used cars with an aggregate value of £2.5bn, competing aggressively with rivals such as Cinch, owned by Constellation Automotive Group.
Prior to its merger with a special purpose acquisition company (SPAC) which took it public, Cazoo 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.
In value terms, however, its 2021 merger with Ajax I proved to be disastrous for shareholders.
Originally valued at $7bn after the combination, it has lost nearly all its value and on Tuesday was trading with a market capitalisation of just $38m.
Like many other growth companies which went public through SPAC mergers, it has suffered from the souring of sentiment towards loss-making tech companies in more challenging economic times.
Some, such as the British digital GP service Babylon Health, have been forced into insolvency within years of listing.
Last month, Cazoo reported a robust operating performance, saying it had also identified scope for a further £20m of cash savings by next year.
The company also has nearly £200m of cash on its balance sheet.
Cazoo has pulled out of European markets to focus on the UK, while it has also sought to reduce its cash burn by scaling back its array of sponsorships.
Goldman Sachs is understood to be advising Cazoo, with PJT Partners advising the noteholders.
Cazoo was contacted for comment on Tuesday evening.