8-KMaterial AgreementsFinancial EventsRegulation FD+2

CARVANA CO. 8-K Report, Material Agreement (Sep 1, 2023)

Filed September 1, 2023For Securities:CVNA

Summary

Carvana Co. (CVNA) has announced the successful expiration and settlement of its comprehensive debt exchange offers and a cash tender offer, which concluded on August 31, 2023, and settled on September 1, 2023. This significant financial maneuver involved exchanging existing senior notes due 2027, 2028, 2029, and 2030 for newly issued senior secured notes maturing in 2028, 2030, and 2031. The company also repurchased a substantial portion of its 5.625% senior unsecured notes due 2025 for cash. Furthermore, Carvana successfully solicited consents to amend the indentures governing its existing notes, effectively eliminating most restrictive covenants and certain events of default. This restructuring aims to provide the company with greater financial flexibility. The new secured notes are guaranteed by most of Carvana's subsidiaries and are secured by a combination of first and second-priority liens on various company assets, though subject to certain restrictions and potential subordination related to its Floor Plan Facility with Ally Parties.

Key Highlights

  • 1Completed a significant debt restructuring by exchanging existing senior notes for new senior secured notes maturing in 2028, 2030, and 2031.
  • 2Successfully repurchased approximately $401.7 million of its 5.625% senior unsecured notes due 2025 for cash at 85% of par.
  • 3Eliminated substantially all restrictive covenants and certain events of default across its existing notes through consent solicitations.
  • 4Issued new senior secured notes totaling approximately $4.2 billion in principal amount.
  • 5The new secured notes are guaranteed by most subsidiaries and secured by various company assets, with first and second-priority liens.
  • 6The effective date of the debt restructuring and covenant amendments was September 1, 2023.
  • 7An amendment to the Floor Plan Facility with Ally Parties was executed to permit the incurrence of the new secured notes, subject to certain conditions.

Frequently Asked Questions

The primary purpose was to restructure Carvana's outstanding debt, replacing existing unsecured senior notes with new secured notes and reducing overall principal via the cash tender offer. This move aims to provide greater financial flexibility by eliminating restrictive covenants and modifying the company's debt profile.

Carvana issued three tranches of new senior secured notes: 9.0%/12.0% due 2028, 9.0%/11.0%/13.0% due 2030, and 9.0%/14.0% due 2031. These notes carry a mix of cash and PIK (Payment-In-Kind) interest, with the PIK component decreasing over time. They are guaranteed by most subsidiaries and secured by company assets, though with specific lien priorities and subject to the 'Ally Payment Prohibition'.

Eliminating restrictive covenants provides Carvana with increased operational and financial flexibility. This means fewer limitations on its ability to make strategic decisions, incur additional debt, make asset sales, or undertake other business activities without needing prior consent from noteholders.

The 'Ally Payment Prohibition' is a condition related to Carvana's Floor Plan Facility with Ally Parties. It essentially means that payments on the new secured notes can be prohibited or subject to turnover if a 'Default' under the Floor Plan Facility occurs and Ally Parties provide notice. This effectively subordinates payments on the new secured notes to the Ally obligations in certain default scenarios, impacting their effective priority.