8-KMaterial AgreementsExhibits & Filings

CARVANA CO. 8-K Report, Material Agreement (Dec 28, 2018)

Filed December 28, 2018For Securities:CVNA

Summary

Carvana Co. (CVNA) filed an 8-K on December 27, 2018, detailing a significant financing transaction executed on December 20, 2018. The company facilitated a refinancing of previously sold automobile finance receivables, repurchasing approximately $134.4 million in receivables from a prior trust and immediately reselling them to a new trust owned by the same purchaser. This transaction generated a fee of approximately $2.3 million for Carvana, which will be recognized as other sales and revenues. Furthermore, Carvana sold an additional $97.8 million in principal balances of finance receivables that it originated but had not previously sold under the new 2018 Transfer Agreement. For these newly originated and sold receivables, Carvana expects to recognize a gain on loan sale within its consolidated statements of operations, reflecting the net proceeds less their carrying amount. This event highlights Carvana's active engagement in managing and monetizing its originated finance receivables.

Key Highlights

  • 1Carvana Co. facilitated a refinancing of automobile finance receivables on December 20, 2018.
  • 2The company repurchased approximately $134.4 million in finance receivables from a previous trust.
  • 3These receivables were immediately resold to a new trust, both transactions facilitated under a new 2018 Transfer Agreement.
  • 4Carvana earned a fee of approximately $2.3 million for arranging and participating in the transaction.
  • 5An additional $97.8 million in newly originated finance receivables were sold to the new trust.
  • 6The company expects to recognize a gain on sale for these newly originated and sold receivables.

Frequently Asked Questions

The main purpose was to facilitate a refinancing of previously sold automobile finance receivables. Carvana repurchased receivables and immediately resold them to a new trust, generating fees and allowing for the sale of newly originated receivables.

Carvana received a fee of approximately $2.3 million for arranging and participating in the refinancing. Additionally, the company expects to recognize a gain on sale for the $97.8 million in newly originated finance receivables sold under the 2018 Transfer Agreement.

Automobile finance receivables are essentially loans made to car buyers. Carvana sells these, either directly originating them or facilitating the resale of previously sold ones, to generate liquidity and manage its balance sheet. This process is a common practice for companies in the automotive retail and financing sector.

Yes, this transaction impacts Carvana's financial position by generating immediate cash flow from fees and the sale of receivables. It also changes the composition of assets on its balance sheet by reducing the amount of receivables held and potentially increasing cash or reducing liabilities, depending on how the proceeds are utilized.