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Bond, junk bond? Aston Martin financial ratings go south as it awaits DBX

Ratings agencies Standard & Poor's and Moody's have taken a dim view of Aston Martin Lagonda. S&P cut its credit rating on the storied carmaker deeper into junk territory this week, and Moody's revised its credit outlook to "negative" after the company raised $150 million in debt from a bond issue at 12% interest, with the option to raise another $100 million at 15%. The Standard & Poor's rating was trimmed by one notch to 'CCC+', which reflects substantial risks and takes it close to default territory after a faster-than-expected cash burn this year. The outlook is negative.  The negative outlook reflects ongoing pressure on profits, a high cash burn, and very high leverage in the face of heightened risks linked to a potential no-deal Brexit and new tariffs on car imports threatened by the United States. The potential salvation for the company is its new DBX luxury SUV, the success of which is critical to its ambitious growth strategy and ongoing creditworthiness, S&P said. But Moody's noted that it's burning cash at a high rate as it nears the launch of the DBX. The British carmaker, known as James Bond's favorite marque, has been hit by falling demand in Europe, the Middle East and Africa. It slumped to a first-half loss in July. Chief Executive Andy Palmer said concerns around Brexit and U.S.-China trade relations were skewing the outlook to the downside, so it was prudent to address investor concerns about its balance sheet. "Taking this debt on — short-term debt — is we think the correct tool to completely remove that thesis that we don't have sufficient liquidity," he told Reuters. "In every substantial and material way, this ensures that we can get through to DBX in spite of what all of those global uncertainties might throw at us." The main tranche comprises notes with an interest rate of 12% due in 2022, while the additional notes could be issued under the same terms if permitted, or could be issued as unsecured notes with an interest rate of 15%, Aston Martin said. Shares of stock in the company, which have had a precipitous fall since they listed in London in October 2018 at 19 pounds, were trading down 5% at 545 pence in early deals. Broker AJ Bell said Aston Martin was known for its high end prices and that situation now also applied to its debt. "These rates are very high and are a major red flag that investors consider the car company to be a high risk entity," it said.

Channeling Bond in a 2005 Aston Martin Vanquish S

Spectre is nearly upon us, the next episode in the James Bond series bringing with it a conceptual peek at the future of Aston Martin courtesy of the DB10. As for how much Bond's new ride predicts the DB11 that will be offered to civilians, "elements" is the most concrete word we've heard to describe the bridge from one to the other, and that doesn't tell us much. Still in the dark about where Aston Martin is going, we recently got the opportunity to remember where it's been. Some friends of Autoblog at Regency Car Rental in LA told us we could borrow their 2005 Aston Martin Vanquish S, so we spent the day hunting nefarious types on twisty Malibu roads, then cruising the Valley looking for a tuner shop that could install a minigun. The Vanquish played a role in the 2002 film Die Another Day, back when Pierce Brosnan made a living as the roguish, rakish MI6 asset. The film rekindled the union between the agent and Aston Martin after a three-movie interlude in which Bond drove BMWs, including, oh-so-briefly, a Z3. Returning with a bang – make that thousands of large- and small-caliber bangs – Q Branch fitted the hero car with rockets, guns that could shoot incoming projectiles, machine guns, an ejector seat, and invisibility camouflage. On the chicest streets in the sleekest LA neighborhoods the Vanquish S still passes the look-at-me test. The Vanquish S we picked up from Regency didn't have any of that, but as indicated by that S at the end it did have more power and performance than the standard Vanquish in the movie. Horsepower from the 5.9-liter V12 went from 460 to 520 in the S, and this model also got stiffer springs, new suspension geometry, quicker steering, and 19-inch lightweight wheels. Exterior modifications were a wider, more curved grille, a front splitter (not present on this car), and a larger rear spoiler. On the most chic streets in the sleekest LA neighborhoods the Vanquish S still passes the look-at-me test – everywhere we went, men and women paid attention to our arrival. As for us, we're split on its looks right down the middle of the car. We've been fans of the front since the day of the reveal, especially the front fascia and headlights, but we're still not sold on the rear, starting from where the vertical line in the door where the sheetmetal expands into those trademark haunches. We didn't encounter anyone else with such reservations.

Aston wants to build DBX on its new platform, not Mercedes'

Aston Martin is proceeding with plans to launch the DBX as its first production crossover. It just can't say at this point what it will be based on. Speaking with Automotive News Europe, Aston's new CEO Andy Palmer indicated that basing the DBX on a Mercedes SUV platform would not be its first choice because they "clearly sit in a very different space to the one we want to go" with the DBX. Instead, the company's first choice would be to build the crossover atop the new platform it's developing for its sports cars. "It just depends how high off the ground it could go," said Palmer. "I don't exclude the possibility of using some [Mercedes] parts, but I would say very much the primary route is our platform." The prospect of building an Aston SUV on Mercedes architecture – namely that of the GL-Class – has been on the table for some time now. The Lagonda SUV concept it showcased at the Geneva show in 2009 was based on the GL, and the two automakers have been forging a tightening alliance in the years since. The British automaker's next-generation engine is to be built by Mercedes-AMG, and it is expected to source other components from the German automaker as well. For its part, Mercedes has been taking a sportier approach with its latest crossovers, as demonstrated by the GLE Coupe that debuted before the more conventional version and the Concept GLC Coupe that previewed the GLK's replacement in Shanghai last month. Aston Martin, on the other hand, is building a new sports car platform that will underpin its next generation of luxury GTs, replacing the long-serving VH architecture that has served for decades as the basis for its entire model line. Perhaps the most surprising of ANE's report, though, is that Aston seems to be proceeding with plans to build the DBX apparently without even knowing what platform it will use.