Carvana shoots higher on bond exchange plan

By Geoffrey Smith

Investing.com -- Carvana (NYSE: CVNA) stock shot higher in premarket trade on Wednesday after the troubled online auto dealership announced a big debt restructuring that improves its chances of avoiding bankruptcy.

The exchange effectively pushes back a big bond redemption deadline by three years from 2025, while also offering the company the chance to conserve cash by offering payment-in-kind (PIK).

Carvana stock, which has been trading at distressed levels as the end of the pandemic boom left it with a huge hangover, soared 21% in premarket as of 09:00 ET (13:00 GMT), adding to gains of 12.2% on Tuesday.

Bondholders will be able to exchange bonds with a nominal value of $1 billion for new notes that pay higher interest but don't fall due until 2028. The new notes will pay 9% annually in cash or 12% on a PIK basis, the company said.

The main issue affected is the 5.625% unsecured notes due 2025, which have been trading at barely half their face value in recent days. Also included in the exchange are the 10.25% unsecured notes due in 2030.

The debt will be secured by a second-priority claim on assets including vehicles. The exchange prices offer range from 61.25c to 80.875c on the dollar, depending on when the notes are submitted.

Carvana, which had never been profitable even during the boom, reported a massive $1.6B loss last year, even though its revenue has more than tripled since the last full year before the pandemic.

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