Investment firms holding most of Carvana’s $5.7 billion in unsecured bonds will fight a restructuring plan that the retailer proposed as a way to reduce its debt and interest expense, Bloomberg reported, citing unnamed sources.
Carvana this week offered to swap up to $1 billion of its unsecured bonds at discount prices in an effort to extend looming repayment deadlines.
Takers would get secured bonds, but only at 61 cents to 81 cents on the dollar. Though that’s better than what the bonds have traded for lately on the open market, investors aren’t biting.
A group of bondholders that banded together late last year to negotiate with Carvana say they won’t accept the deal, according to Bloomberg’s sources. The group, led by Apollo Global Management Inc. and Pacific Investment Management Co., holds more than 80% of Carvana’s debt, giving it leverage to block the move.
If Carvana somehow manages to push the bond-swap through, it would reduce the face value of its unsecured bond debt by $1.3 billion and its annual interest bill by about $100 million.
Carvana’s interest expense in 2022 shot up nearly three times year on year to $486 million. In February stock analysts estimated the company’s interest expense this year at $600 million.