Asos shares plunge as it confirms talks with lenders over borrowing

theguardian.com:

Shares in the fast-fashion firm Asos have plunged after it confirmed it is in talks with lenders over changing the terms of a £350m borrowing facility to give it more flexibility in tough times.

In a statement, the online clothing retailer said it was in the “final stages” of agreeing changes to its financial covenants for its revolving credit facility, giving it “significantly increased financial flexibility against the uncertain economic backdrop”.

The statement added: “Asos retains a strong liquidity position and this is a prudent step in the current environment.”

Shares in the London-listed company fell by almost 12% in early trading on Monday, bringing losses over the year to 80%, as the company prepares to announce its full-year results on Wednesday.

Monday’s statement came in response to reports at the weekend that it had approached banks – including Barclays, HSBC and Lloyds Banking Group – to alter its borrowing facility.

Sky News cited sources in the City saying the lenders had hired AlixPartners and the law firm Clifford Chance to advise them on the situation.

The leading credit insurer Allianz Trade, formerly known as Euler Hermes, has also reduced its support for the online retailer, according to the Sunday Times.

Credit insurers provide cover to Asos’s suppliers in the event it fails to pay them. Allianz Trade’s move could force the clothing seller to pay for products upfront, potentially hurting cashflow.

“This happened towards the end of August and there has been no adverse impact on trading relationships with our suppliers,” Asos said.

The company benefited from locked-down shoppers staying at home during the coronavirus pandemic as the company’s shares soared and it posted record-breaking profits.

However, it