Carvana Co. said it’s offering to exchange up to $1 billion of bond principal at below-par prices as the struggling online car seller works to restructure its debt load.
(Bloomberg) — Carvana Co. said it’s offering to exchange up to $1 billion of bond principal at below-par prices as the struggling online car seller works to restructure its debt load.
The company is offering to swap five series of bonds, including its 5.625% unsecured notes due 2025 and 10.25% unsecured notes due 2030 for new secured notes due 2028 that pay 9% in cash or 12% in-kind, according to a statement Wednesday. The debt will be secured by a second-priority claim on assets including vehicles.
Holders can swap their bonds for between 61.25 cents on the dollar and 80.875 cents on the dollar, depending on when they submit the notes.
The company also said it moved its car auction business Adesa U.S. into an unrestricted subsidiary, a maneuver that can lay the groundwork for future debt issuance tied to that brand. J. Crew infamously drew investor ire after transferring intellectual property including its brand name into such a unit, and then using that collateral to issue debt. Adesa won’t be used to secure the new bonds, according to the statement.
The exchange comes as Carvana deals with deeply distressed debt and plunging shares. The company’s stock soared during the pandemic as a chip shortage sent used car prices soaring, but Carvana’s outlook has since soured. It posted a bigger-than-expected loss in February following its lowest retail unit sales in two years.
Carvana’s 10.25% bond due 2030 last changed hands at 53 cents on the dollar, according to Trace, and its shares have dropped 94% in the past year through Tuesday. Shares of Carvana surged 25% in early trading in New York.
The early deadline for the swap, which offers the best terms for investors, is 5 p.m. on April 4 in New York.
–With assistance from Rachel Butt.
(Updates with additional detail throughout)
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