Hyoung Chang/The Denver Post/Getty Images
A Carvana slot machine in Denver.
New York CNN –
Shares of Carvana, the online used car seller known for its large glass auto vending machines, ended Wednesday’s trading session up more than 40% after the company reached a debt restructuring agreement.
According to a press release, the Phoenix-based company will reduce its outstanding debt by more than $1.2 billion. Specifically, the agreement reached with bondholders means that more than 80% of Carvana’s “unsecured bond terms” in 2025 and 2027 will be eliminated and required cash interest expenses will be reduced by over $430 million per year for the next two years, it said it.
Carvana has been struggling financially in recent months due to falling used car prices. A relatively new player in the used-car space, the company has lost money in most quarters since its IPO in 2017 as it focused on sales growth rather than short-term profitability.
“The strong performance of our business in 2023 provided an opportunity for an impactful and win-win transaction for Carvana and its senior unsecured bondholders,” said Mark Jenkins, Carvana’s Chief Financial Officer.
“This transaction significantly increases our financial flexibility by reducing our overall debt, extending maturities and reducing short-term cash interest expenses while continuing to execute on our plan to significantly increase profitability and return to growth,” he said.
Carvana started 10 years ago with a plan to revolutionize the used car market by offering online car buying and trade-ins as well as unique car vending machines.
The company also announced quarterly results, with sales beating expectations. However, fewer cars were sold than forecast. Carvana (CVNA) shares are up a whopping 1,000% this year.