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Bond Market News
Carvana’s Bonds Rally on Deal to Cut Debt by Over $1bn
July 20, 2023
Carvana’s bonds rallied over 1-2 points after the company struck a deal with most of its bondholders (including Apollo Group) to cut its outstanding debt by more than $1bn. The troubled used-car dealer’s long-term debt stood at $6.54bn as of end-June and the elevated purchase price paid by them are not realizing sufficient revenue due to inflation, spending cuts etc. The company has resorted to inventory cuts, slashing advertising expenses and selling auto loans. Carvana added that it plans to raise about $350mn via a share issuance to pay down some debt, with about $125mn coming from the CEO’s family and their entities. Analysts believe that the deal will reduce over 83% of Carvana’s unsecured notes outstanding that are due in 2025 and 2027. It is also expected to lower interest expenses by over $430mn per year over the next two years.
Carvana’s stock price rose by 40% yesterday and its 5.5% 2027s are up 2.7 points to 71.4, yielding 15.96%.
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