8-KMaterial AgreementsFinancial EventsExhibits & Filings

CARVANA CO. 8-K Report, Material Agreement (Sep 21, 2018)

Filed September 21, 2018For Securities:CVNA

Summary

Carvana Co. (CVNA) announced on September 21, 2018, the issuance of $350 million in 8.875% Senior Notes due 2023. These notes are senior unsecured obligations and are guaranteed by Carvana's existing domestic restricted subsidiaries. The net proceeds are intended to be used for general corporate purposes, including funding working capital, capital expenditures, operating expenses, and strategic business development opportunities, such as acquisitions and investments. This debt issuance provides Carvana with additional capital to fuel its growth initiatives. Investors should note that the notes are senior unsecured and rank equally with existing and future senior indebtedness, but are subordinated to secured obligations. The indenture includes restrictive covenants that limit certain actions by the company and its subsidiaries, though some covenants may be suspended if the notes achieve an investment grade rating. The ability to redeem the notes early, under certain conditions including a change of control, is also a key feature for investors to consider.

Key Highlights

  • 1Issuance of $350 million aggregate principal amount of 8.875% Senior Notes due 2023.
  • 2Notes are guaranteed on a senior unsecured basis by existing domestic restricted subsidiaries.
  • 3Proceeds to be used for general corporate purposes, including working capital, capital expenditures, and strategic growth opportunities.
  • 4Notes mature on October 1, 2023, with semi-annual interest payments starting April 1, 2019.
  • 5Company has the option to redeem notes on or after October 1, 2020, with specific redemption prices and conditions.
  • 6Indenture contains restrictive covenants limiting debt incurrence, liens, dividends, investments, and other activities, with potential suspension upon investment grade rating.
  • 7A change of control event triggers an offer to purchase all notes at 101% of the principal amount.

Frequently Asked Questions

The net proceeds from the issuance of these Senior Notes are intended for general corporate purposes. This includes funding working capital, capital expenditures, operating expenses, and pursuing strategic business development opportunities such as acquisitions or investments in other businesses, products, or technologies.

The Senior Notes bear an interest rate of 8.875% per annum, payable semi-annually on April 1 and October 1, beginning April 1, 2019. The notes will mature on October 1, 2023.

The notes are senior unsecured obligations of Carvana and its guarantors. They rank equally in right of payment with other existing and future senior indebtedness. However, they rank effectively junior to all secured obligations to the extent of the collateral securing them, and structurally junior to any indebtedness of subsidiaries that are not guarantors.

Yes, the indenture includes restrictive covenants that limit the company and its restricted subsidiaries from various actions. These include incurring additional debt, creating liens, paying dividends, making certain investments, and engaging in affiliate transactions, among others. Certain covenants may be suspended if the notes achieve an investment grade rating from two major rating agencies and no default is occurring.