Investors including BlackRock Inc. have agreed to provide another loan of at least $15 million to Razor Group, according to people familiar with the matter, as the German e-commerce brand aggregator attempts to stave off a liquidity crunch. The relatively modest financing proposal indicates the severity of the cash squeeze at the Berlin-based firm that, according to Pitchbook data, has raised more than $1.3 billion in capital.
It’s part of a turnaround effort that includes talks between Razor and fellow aggregator Infinite Commerce Inc. for a potential merger, the people said, asking not to identified because the process is confidential.
A total of $30 million in bridge financing has been granted to Razor over recent months by lenders such as Victory Park Capital Advisors as well as equity investors including Christian Angermayer’s Presight Capital, the people added.
The company is also working on a potential fundraising with existing shareholders, according to emails sent to investors in late February and seen by Bloomberg News. Communications show that Razor investors were contemplating a financing of at least $75 million alongside the M&A deal.
Spokespeople for Razor, BlackRock and Presight Capital declined to comment on the proposed turnaround. Spokespeople for Victory Park and Infinite Commerce didn’t respond to requests for comment.
E-Commerce Bet
So-called Amazon aggregators buy up firms that sell products via online platforms, with the aim of saving costs on logistics and marketing by bundling brands under one roof. The boom in e-commerce during the pandemic encouraged investors to bet billions on these businesses, but falling consumer demand since the end of lockdown has seen a wave of restructuring across the sector — to the detriment of their investors.
One of their main strategies for plugging holes in these aggregators’ balance sheets has been masterminding consolidation between the e-commerce conglomerates themselves. Infinite Commerce, the potential merger partner, is itself a combination of four brand aggregators that were merged with the help of Victory Park last year. Razor Group also acquired Perch — another BlackRock investment in the aggregator sector — last year.
BlackRock and Victory Park joined Razor’s roster of lenders in May 2021, according to a statement at the time. However, the investment has since soured with a BlackRock middle-market private credit fund downgraded to junk last week, in part due to “credit challenges” stemming from brand aggregators. That included a $50.3 million unrealized loss on Razor as of Dec. 31.
The publicly traded fund, BlackRock TCP Capital Corp., will “avoid meaningful concentrations in any one industry subsector, such as Amazon aggregators,” Chief Executive Officer Phil Tseng said on a Feb. 27 earnings call.
The industry consolidation is fraught with tension between equity holders — who don’t want to take complete losses on their investments — and creditors, who are usually first to be paid in a liquidation but know they’ll only get pennies on the dollar. The hope is that with further acquisitions, Razor can aim for an initial public offering and offer something in return for all investors.
Razor ran into issues with inventory, according to the emails from late last month. A delay in closing the purchase of Perch as well as liquidity constraints led to a pause in new orders, leading to periods when products were out of stock. Supply-chain issues also contributed to difficulties replenishing stock later, the messages show.
This pressure on earnings eventually led Razor to breach the debt terms of a working capital facility, which then prompted Razor’s other lenders to allege a default on their own financing, according to the emails. This paved the way for discussions over a consensual solution, they show.
BlackRock also was involved in the restructuring of SellerX, another German brand aggregator, and agreed to take a stake in the company as part of a debt-for-equity swap, Bloomberg previously reported. Another of its brand aggregator investments, Thrasio, emerged from Chapter 11 bankruptcy last year.
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