2023-03-22 16:12:59 ET
Carvana ( NYSE: CVNA ) stock notched a solid gain on Wednesday after announcing plans to restructure its debt load.
The Arizona-based company announced a exchange offers for an aggregate principal amount of $1B in bonds due in 2028. The holders would have a second priority claim behind the firm’s key lender Ally Financial ( ALLY ). The company also designated its recent acquisition, ADESA US Auction, as an unrestricted subsidiary.
Shares of the Phoenix-based e-commerce company rose nearly 30% shortly after officially disclosing the plan.
However, that gain was pared in afternoon trading as both a Fed hike and a sign of bondholder pushback emerged. According to Bloomberg, a group of funds holding the bulk of Carvana’s ( CVNA ) over $5B in bonds plan to buck the exchange. As the bloc reportedly holds 80% of Carvana’s debt, the group that is apparently led by PIMCO and led by Apollo Global Management Inc. could certainly quash any plans to restructure the debt load.
In addition to documents outlining the debt reduction plan, the company provided preliminary guidance. Per an SEC filing, total net sales are slated to range from $2.4B to $2.6B in Q1 as compared to the analyst consensus of $2.71B. Carvana also expects a first-quarter loss of between $50M and $100M, notably lighter than Q1 2022 $348M loss, aided by lower advertising expense and general cost-cutting measures.
Shares closed 6.31% higher on Wednesday.
Dig into the company’s financials .
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Why did Carvana stock drive higher on Wednesday? A new plan to deal with debt