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CARVANA CO. 8-K Report, Material Agreement (Dec 4, 2017)

Filed December 4, 2017For Securities:CVNA

Summary

Carvana Co. (CVNA) announced a private placement of $100 million in Class A Convertible Preferred Stock with DDFS Partnership LP, an affiliate of Dundon Capital Partners. This transaction, expected to close within three business days, will provide the company with approximately $98.5 million in net proceeds, which are earmarked for general corporate purposes. The preferred stock carries a 5.50% annual cumulative dividend, ranks senior to common stock in dividends and liquidation, and holders will not have general voting rights but will have limited special approval rights regarding the issuance of senior or parity equity securities. A key feature is the conversion option into Class A common stock at an initial price of approximately $19.69 per share, with Carvana retaining the right to force conversion under certain conditions.

Key Highlights

  • 1Carvana Co. raised $100 million through a private placement of newly created Class A Convertible Preferred Stock.
  • 2The purchaser is DDFS Partnership LP, an affiliate of Dundon Capital Partners.
  • 3Net proceeds are expected to be approximately $98.5 million, intended for general corporate purposes.
  • 4The Preferred Stock accrues a 5.50% annual cumulative dividend payable quarterly.
  • 5Preferred Stock ranks senior to common stock in terms of dividends and liquidation rights.
  • 6Holders of Preferred Stock have limited voting rights but possess certain special approval rights concerning the issuance of senior or pari passu equity securities.
  • 7The Preferred Stock is convertible into Class A Common Stock at an initial conversion price of approximately $19.69 per share, with Carvana having a mandatory conversion option under specific conditions.

Frequently Asked Questions

The primary purpose of this private placement is to raise capital for general corporate purposes. The company expects to receive approximately $98.5 million in net proceeds after accounting for transaction fees.

The Class A Convertible Preferred Stock has an initial stated value of $1,000 per share and pays a cumulative dividend of 5.50% per annum, payable quarterly. It ranks senior to the common stock on dividends and liquidation. Holders have limited voting rights but certain special approval rights regarding the issuance of senior or parity equity securities. It is convertible into Class A Common Stock at an initial conversion price of approximately $19.69 per share.

The preferred stock becomes convertible by its holders twenty days after an information statement is mailed to shareholders. Carvana Co. also has a 'Mandatory Conversion Option' on or after the first anniversary of closing, allowing it to force conversion if the common stock's volume-weighted average price meets certain thresholds (150% of the then-applicable conversion price).

The purchaser is DDFS Partnership LP, an affiliate of Dundon Capital Partners. The investment agreement prohibits the purchaser from transferring the preferred stock or the common stock issued upon conversion without Carvana's consent for six months from the closing date, with exceptions for certain permitted transfers.