BlackRock to Auction German Startup SellerX Amid Debt Troubles
BlackRock Inc has initiated an auction for German startup SellerX after a significant loan went into default. This aggressive move was revealed in an advertisement published Friday in the Börsen-Zeitung newspaper. The auction is scheduled for September 17 at a Berlin hotel. Such auctions in Germany allow creditors to seize control of companies when negotiations between an enterprise, investors, and lenders reach a deadlock. This often results in the complete loss of equity for existing investors.
Market Shakeout Among Aggregators
The decision to auction SellerX by BlackRock highlights the ongoing shakeout in the market for companies known as aggregators. These firms raised billions in capital and acquired brands sold on Amazon.com Inc. However, they are now struggling due to the post-pandemic slowdown in e-commerce growth. SellerX, backed by private equity firm L Catterton, is one such aggregator facing financial difficulties.
GLAS, a debt administration services provider, is managing the auction process. According to corporate filings, GLAS is the security agent for SellerX’s loan facility. The loan was initially granted by BlackRock and Victory Park Capital.
BlackRock and SellerX – Loan Defaults and Non-Accrual Status
In 2021, BlackRock and Victory Park Capital extended a $400 million loan to SellerX. This loan was later increased when SellerX acquired another aggregator, Elevate Brands. However, SellerX has since defaulted on the loan, forcing BlackRock to move it to non-accrual status. This indicates that SellerX has stopped making required payments on the loan. During an earnings call earlier this month, BlackRock disclosed that discussions with SellerX stakeholders were ongoing to find a “path to recovery.”
Both BlackRock and Victory Park Capital declined to comment on the auction of SellerX. Additionally, neither L Catterton nor SellerX responded to requests for comment.
The Struggles of Aggregators and the Future of SellerX
SellerX was once valued at $1 billion and was among several startups aiming to become leading consumer brands in the digital age. However, the slowdown in online sales growth after the pandemic has left many aggregators, including SellerX, burdened with unmanageable debt. This situation has led to industry-wide consolidation and has pitted major investment firms against each other in efforts to restructure or liquidate these distressed companies.
L Catterton, the private equity firm backed by Bernard Arnault, has invested in several aggregators, including SellerX. Meanwhile, BlackRock and Victory Park Capital have provided loans to multiple firms within the sector. These three entities now find themselves frequently negotiating strategies to turn around these struggling companies.
Victory Park Capital and Industry Implications
Victory Park Capital, which previously secured up to $500 million in senior secured credit facilities from Apollo Global Management Inc., is itself in transition. The firm is being acquired by Janus Henderson Group Plc, a deal expected to close later this year. This acquisition adds another layer of complexity to the ongoing negotiations regarding distressed aggregators.
Founded in 2020, SellerX managed to raise over $750 million in debt and equity. However, the company has struggled to maintain its ambitious growth trajectory. Its co-founders, who also served as co-chief executives, have announced plans to exit the company, as reported by Sifted, a news outlet covering European startups.
Investor Implications and Next Steps
The upcoming auction of SellerX marks a critical juncture for the company and its stakeholders. For BlackRock, this move represents a last resort to recoup some of its investment following the default on the loan. For other investors and creditors, the auction could either spell the end of their involvement or open the door to new opportunities under different ownership.
As the auction date approaches, industry watchers and investors will closely monitor any developments. The outcome will likely set a precedent for how similar situations involving distressed aggregators are handled in the future. Meanwhile, the fate of SellerX remains uncertain, with its once-bright prospects now overshadowed by financial difficulties.
