8-KMaterial AgreementsRegulation FDExhibits & Filings

CARVANA CO. 8-K Report, Material Agreement (Jul 19, 2023)

Filed July 19, 2023For Securities:CVNA

Summary

Carvana Co. (CVNA) has filed an 8-K detailing a significant Transaction Support Agreement (TSA) entered into on July 17, 2023, with key stakeholders including Carvana Group, the Garcia Parties, and over 90% of eligible holders of its Existing Unsecured Notes. This agreement outlines a comprehensive restructuring plan designed to improve the company's financial standing. The core of the TSA involves a substantial equity raise of at least $350 million and the exchange of existing unsecured debt for approximately $4.376 billion in new senior secured notes across three tranches with varying interest rates and PIK (Payment-in-Kind) options. Additionally, Carvana will conduct a cash tender offer for certain 2025 Notes and solicit consents to amend indenture provisions. The TSA also includes provisions for the Garcia Parties to purchase a pro rata portion of the new equity, up to $126 million, subject to certain conditions. The company has also entered into a Distribution Agreement for an "at the market" equity offering of up to $1.0 billion. This filing signals a critical step in Carvana's efforts to deleverage its balance sheet and secure future operational flexibility. Investors should monitor the consummation of these transactions, the proceeds from the equity offerings, and the resulting changes to the company's debt structure.

Key Highlights

  • 1Carvana entered a Transaction Support Agreement (TSA) with major stakeholders, including noteholders representing over 90% of outstanding unsecured notes.
  • 2The TSA aims to restructure Carvana's debt and bolster its equity base.
  • 3The plan includes a new equity issuance targeting at least $350 million in gross proceeds.
  • 4Existing unsecured notes totaling up to $4.376 billion will be exchanged for new senior secured notes with varying interest rates and PIK features.
  • 5A cash tender offer for certain 2025 Notes is also part of the agreement.
  • 6Carvana has an 'at the market' equity offering program in place to sell up to $1.0 billion of Class A common stock.
  • 7The Garcia Parties have committed to purchase a portion of the new equity, up to $126 million, under specific conditions.

Frequently Asked Questions

The primary goal of the Transaction Support Agreement is to significantly restructure Carvana's balance sheet by raising new equity and exchanging existing unsecured debt for new senior secured notes. This aims to reduce financial leverage, improve liquidity, and enhance the company's long-term financial stability.

Carvana plans to raise at least $350 million in gross proceeds through new equity offerings. Additionally, they have entered into a separate agreement for an 'at the market' equity offering program that could allow them to sell up to $1.0 billion of Class A common stock.

The majority of Carvana's existing unsecured notes will be exchanged for new senior secured notes. These new notes will be issued in three tranches, with aggregate principal amounts of up to $1.0 billion, $1.5 billion, and $1.876 billion, respectively. These new notes carry different interest rates, some of which are 'cash/PIK toggle' notes, meaning interest can be paid in cash or through 'payment-in-kind' (PIK).

Yes, the Garcia Parties have agreed to purchase their pro rata portion of any New Equity offering, up to a maximum of $126 million. This commitment is contingent on certain conditions, including termination if Carvana raises $700 million in New Equity from other sources.