Carvana (NYSE:CVNA) shares are moving sharply higher in pre-market Wednesday after the used car retailer said it has struck a partnership to restructure its debt.
The agreement with a group of noteholders will eliminate more than 83% 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, the company said in an update.
The deal will reduce the total debt by over $1.2 billion.
“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.
“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.”
Moreover, Carvana moved forward with the release of the Q2 earnings result. It reported revenue of $2.97B, a 24%-year-over-year drop, but still better than the expected $2.6B. Gross profit surged 26% YoY to $499M, easily ahead of the consensus of $409.6M.
“Carvana performed exceptionally well in the second quarter and set Company records for Adjusted EBITDA and gross profit per unit, which was up 94% year-over-year, all while continuing to lower expenses. Our strong execution has made the business fundamentally better, and combined with today’s agreement with noteholders that reduces our cash interest expense and total debt outstanding, gives us great confidence that we are on the right path to complete our three-step plan and return to growth,” said Ernie Garcia, Carvana's Founder and Chief Executive Officer.
The company said it sold 76,530 cars in Q2, a decrease of 35% YoY.
CVNA stock is up 30% in early Wednesday trading.