-
Used car retailer fails to lure enough investor participation
-
Key debtholder group has opposed the debt exchange offer
Carvana Co. canceled a $1 billion debt swap after a group of creditors refused to exchange their notes, posing a challenge as the used car retailer attempts to rein in its debt load.
The online automobile seller failed to convince holders of at least $500 million of notes to participate in the exchange offer before the deal expired, according to a statement Friday.
The swap’s cancellation marks the latest blow for the Tempe, Arizona-based company, which had sweetened the deal terms and repeatedly extended the timeline in a bid to lure investor participation.
A group of debt holders, including Apollo Global Management Inc. and Pacific Investment Management Co., came together last year in an effort to negotiate with Carvana in preparation for a restructuring. The cohort opposed the debt exchange when Carvana first launched it in March, with some lenders proposing alternative deals.
The company’s shares fell as much as 8% on Friday before paring losses to trade 2.8% lower as of 10:35 a.m. in New York. The 5.625% notes due 2025 last changed hands at 78 cents on the dollar Thursday, according to Trace bond data.
Money managers remain focused on trouble as Carvana’s $8.7 billion debt load drags on profits. While the firm reported narrower-than-expected losses in the first quarter, Carvana still lost more than $4,000 on every car the company sold.
Half of the per-car loss is in interest payments, which means that even management’s plan to slash costs can only go so far to stanch red ink.
Carvana had attempted to swap several series of its notes, including a 5.625% bond due 2025, for new senior-secured second-lien debt due 2028 that carried 9% cash payments or 12% payment-in-kind.
Written by: Michael Tobin and David Welch @Bloomberg.com
The post “Carvana Cancels $1 Billion Debt Swap as Creditors Hold Out” first appeared on Bloomberg.com
BullsNBears.com was founded to educate investors about the eight secular bear markets which have occurred in the US since 1802. The site publishes bear market investing recommendations, strategies and articles by its analysts and unaffiliated third-party and qualified expert contributors.
No Solicitation or Investment Advice: The material contained in this article or report is for informational purposes only and is not a solicitation for any action to be taken based upon such material. The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. Additionally, the material accessible through this article or report does not constitute a representation that the investments or the investable markets described herein are suitable or appropriate for any person or entity.