Shares of Carvana, the online used-car seller known for its tall, glass car-vending machines, surged by more than 30% in early trading Wednesday after the company reached a debt restructuring agreement.
The Phoenix-based company will reduce its outstanding debt by more than $1.2 billion, according to a release. Specifically, the agreement made with noteholders means it's eliminating more than 80% of Carvana's 2025 and 2027 "unsecured note maturities and lower required cash interest expense by over $430 million per year for the next two years," it said.
Carvana has been struggling financially in recent months because of declining used car prices. A relatively new player in the used car field, it has lost money most quarters since it went public in 2017 as it aimed for sales growth rather than short-term profitability.
"The strong performance of our business in 2023 presented an opportunity for an impactful and win-win transaction for Carvana and its senior unsecured noteholders," said Mark Jenkins, Carvana's chief financial officer, in a statement.
"This transaction significantly increases our financial flexibility by reducing our total debt, extending maturities, and lowering near-term cash interest expense as we continue to execute our plan of driving significant profitability and returning to growth," he said.
Carvana launched 10 years ago with a plan to disrupt the used car market, offering both online car shopping and trade-ins as well as distinctive car vending machines.
The company also announced quarterly earnings, with revenue beating expectations. However, it sold fewer cars than forecast. Carvana shares are up now a whopping 1,000% for the year.
