A Carvana glass tower lit up in Oak Brook, Illinois, February 23, 2022.
Armando L. Sanchez | Tribune News Service | Getty Images
Carvana has reached a debt restructuring deal that will reduce the used car dealer’s total outstanding debt by more than $1.2 billion, the company said Wednesday.
Carvana said the agreement will eliminate more than 83% of unsecured bond maturities in 2025 and 2027 and reduce required cash interest expense by more than $430 million annually for the next two years.
In a separate public filing on Wednesday, the company said it will sell $1 billion worth of stock as it attempts to raise capital and restructure its business.
Shares of the company rose more than 30% in premarket trading on Wednesday after falling about 7% before the announcement. Carvana shares are up this year from about $4 a share to start the year to about $40 as of Tuesday’s close. That’s still about 90% off its all-time high of nearly $377 in August 2021.
“This transaction significantly increases our financial flexibility by reducing our total debt, extending maturities and lowering short-term interest expenses as we continue to execute on our plan to generate significant profitability and return to growth,” said Carvana CFO Mark Jenkins in a statement.
Carvana said the restructuring deal covered about $5.2 billion in senior unsecured bonds and included Apollo Global Management, the largest bondholder. Under the terms of the deal, creditors will get new secured notes. The new debt will also be due later than the old notes.
Carvana’s stock performance in 2023.
The company’s long-term debt at the end of the second quarter was $6.5 billion, slightly down from nearly $6.6 billion at the end of last year. That represented a majority of Carvana’s total liabilities of nearly $9.3 billion at the end of the second quarter, Carvana reported.
The company has been working on such a deal for more than a year as the stock went into freefall due to high debt and improper management during the coronavirus pandemic.
The agreement was announced in conjunction with the company second quarter results. This is what Carvana reported.
- Loss per share: 55 cents versus an expected loss of $1.15 per share, according to median analyst estimates compiled by Refinitiv.
- Gain: $2.97 billion versus $2.59 billion expected, according to Refinitiv.
The company reported a net loss of $105 million, or 55 cents per share. That’s an improvement over the net loss of $439 million, or $2.35 per share, recorded in the prior year period.
However, revenue of $2.97 billion was lower than the $3.88 billion a year ago.
Total gross profit per unit, or GPU, which is closely watched by investors, was $6,520 during the second quarter, up 94% from a year earlier and beating the company’s previous best quarter by 27%.
“Our strong execution has fundamentally improved the business, and combined with today’s agreement with bondholders that reduces our cash interest expense and total outstanding debt, gives us great confidence that we are on track to complete our three-step plan and get back to business. turn to growth,” said Ernie Garcia, CEO of Carvana said in a statement.
Carvana reported adjusted earnings before interest, taxes, depreciation and amortization of $155 million compared to a loss of $216 million a year earlier.
Correction: This story has been updated to correct the characterization of Carvana’s indebtedness prior to the restructuring deal.
