Carvana announces debt restructuring deal
Used-car retailer Carvana announced that it entered into a transaction support agreement with a group of noteholders representing over 90% of the aggregate principal amount outstanding of the company’s existing senior unsecured notes.
The agreement will eliminate about 83% of Carvana’s 2025 and 2027 unsecured note maturities and lower required cash interest expense by $430 million a year for the next two years. The company expects to reduce its total debt outstanding by more than $1.2 billion.
Carvana also announced its best quarter yet (Q2 2023) in terms of adjusted EBITDA and total gross profit per unit. Adjusted EBITDA margin was 5.2%, an improvement of 10.8% compared to second quarter 2022, exceeding the Company’s previous best quarter by 1.6%. Total gross profit per unit was $6,520, an increase of 94% compared to second quarter 2022, exceeding the Company’s previous best quarter by 27%.
During the quarter, the company sold 76,530 unites, a decrease of 35% compared to Q2 2022. Carvana ended the quarter with a net loss of $105 million.
“The strong performance of our business in 2023 presented an opportunity for an impactful and win-win transaction for Carvana and its senior unsecured noteholders. This transaction significantly increases our financial flexibility by reducing our total debt, extending maturities, and lowering near-term cash interest expense as we continue to execute our plan of driving significant profitability and returning to growth.” – Mark Jenkins, Carvana’s CFO.
“Apollo is pleased to support this debt exchange agreement, which stands to significantly strengthen Carvana’s financial position while providing creditors with new first lien debt. Working with Carvana, PIMCO, Ares and the ad hoc group of noteholders, we believe this agreement demonstrates the types of win-win outcomes that companies can achieve with constructive and engaged financing partners. We continue to have strong conviction in Carvana’s strategy and Ernie Garcia’s vision to revolutionize the way consumers buy, sell, and finance their vehicles.” – John Zito, Apollo Deputy CIO of Credit.