Asos in 'final stages' of agreeing new financial covenants to avert cash-flow crisis

In a note issued to the City this morning, Asos said an announcement about new covenants on its current credit facilities, which mature in summer 2024, was imminent, which “will give Asos significantly increased financial flexibility against the uncertain economic backdrop”.

Asos insists it “retains a strong liquidity position and this is a prudent step in the current environment”.

The announcement followed the publication of a story by The Sunday Times, which said that one of Asos’ main insurers, Allianz Trade, had cut cover for its suppliers by half.

Credit insurance is a key part of the fashion supply chain as it protects suppliers from financial liability if their client should go bust between accepting an order and being paid for it. 

Without insurance, suppliers will be more likely to demand payment before fulfilling an order, which can in turn damage a retailer’s cash flow.  

Asos said the insurance cut had come in August, adding “there has been no adverse impact on trading relationships with our suppliers”.

Restructuring its lending facility will mean that Asos can forgo having to pay back £350m in credit at increased borrowing costs due to the ongoing financial instability in the UK economy.

Asos has yet to announce a replacement for finance director Mat Dunn, who is leaving the retailer for Gymshark at the end of the year. 

Credit insurers are becoming increasingly wary of retail, which is being clobbered by spiralling costs and waning customer demand, with cuts hitting the likes of AO, Joules and Ted Baker already this year. 

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