On Wednesday, Carvana revealed that it has finalized a debt restructuring deal that will decrease its total outstanding debt by over $1.2 billion.
This agreement, the company stated, will wipe out above 83% of its unsecured note maturities set for 2025 and 2027, reducing its annual cash interest expense by over $430 million for the upcoming two years.
In addition, Carvana announced in a public filing on Wednesday that it plans to sell up to $1 billion in shares to boost capital and restructure its operations.
Carvana's stock opened at $53.99 a share on Wednesday, over 35% up, marking its highest opening price in over a year. Despite a rise from approximately $4 per share at the beginning of the year to around $40 on Tuesday's close, the stock remains about 90% down from its all-time high of nearly $377 in August 2021.
In a statement, Carvana CFO Mark Jenkins emphasized that the transaction significantly increases the company's financial flexibility. He mentioned that it achieved this by reducing total debt, extending maturities, and lowering near-term cash interest expense, which allows Carvana to continue working towards significant profitability and growth.
The restructuring deal encompasses about $5.2 billion of senior, unsecured bonds, including those held by Apollo Global Management, Carvana's biggest bondholder. According to the agreement's terms, creditors will receive new secured notes, which will mature later than the previous ones.
Carvana ended the second quarter with long-term debt standing at $6.5 billion, marginally lower than the nearly $6.6 billion from the end of last year. This constituted a significant proportion of Carvana's total liabilities, which were close to $9.3 billion at the end of the second quarter.
Struggling with a heavy debt load and inefficient management during the COVID-19 pandemic, the company's stock value plummeted, sparking the negotiation of this deal over a year ago.
The announcement was made together with the company's second-quarter earnings report, which highlighted a loss per share of 55 cents, beating the anticipated loss of $1.15 per share.
Revenue was reported at $2.97 billion, surpassing the expected $2.59 billion. The company also reported a net loss of $105 million or 55 cents per share, marking an improvement from the net loss of $439 million, or $2.35 per share, recorded in the same period last year.
However, the reported revenue of $2.97 billion was a decrease from the previous year's $3.88 billion.
Carvana's total gross profit per unit (GPU), a key metric for investors, rose by 94% compared to last year, reaching $6,520 in the second quarter, and beating the company's previous best quarter by 27%.
CEO Ernie Garcia stated that strong execution and the recent agreement reducing cash interest expense and total outstanding debt instill confidence in Carvana's progress toward completing its three-step plan and returning to growth.
Finally, Carvana reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $155 million, a stark contrast to the loss of $216 million reported in the same period the previous year.