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Carvana Surges After Announcing Restructuring Which Would Shrink Debt By $1.3 Billion, Slash Interest By $100 Million

Carvana Surges After Announcing Restructuring Which Would Shrink Debt By $1.3 Billion, Slash Interest By $100 Million

Carvana, one of the…

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Carvana Surges After Announcing Restructuring Which Would Shrink Debt By $1.3 Billion, Slash Interest By $100 Million

Carvana, one of the high-flying stocks during the post-covid lockdowns which came crashing down to earth almost as fast at is soared, is surging this morning, rising as much as 30% after the FT first reported, and the company then confirmed, that it was offering to exchange billions of bond principal at below-par prices as the struggling online car seller works to restructure its debt load.

The company is offering to swap five series of bonds, including its 5.625% unsecured notes due 2025 and 10.25% unsecured notes due 2030 for new secured notes due 2028 that pay 9% in cash or 12% in-kind, according to a statement Wednesday. The company would swap the existing bonds maturing between 2025 and 2030 for between 61.25 cents on the dollar and 80.875 cents on the dollar, depending on when they submit the notes. The early deadline for the swap, which offers the best terms for investors, is 5 p.m. on April 4 in New York. The bondholders would have a second priority claim, behind lender Ally Financial, on vehicle inventory and intellectual property including Carvana’s brand.

If successful, the company will restructure a substantial portion of its $9BN debt load as it attempts to stay afloat at a time of declining vehicle sales. If the offering is fully subscribed, the exchange offer to existing creditors would reduce the face value of its outstanding $5.7bn of unsecured bond debt by $1.3bn and its annual cash interest bill by roughly $100 million.

The exchange comes as Carvana deals with deeply distressed debt and plunging shares. The company’s stock soared during the pandemic as a chip shortage sent used car prices soaring, but Carvana’s outlook has since crashed, losing over 94% of its value since peaking in August 2021. It also posted a bigger-than-expected loss in February following its lowest retail unit sales in two years.

Carvana’s 10.25% bond due 2030 last changed hands at 53 cents on the dollar, according to Trace.

The Financial Times has previously reported that at least six prominent credit investment firms have joined forces to negotiate with Carvana. According to a person familiar with the situation, there has not been much interaction between the company and its bondholders. One prominent member of the group, Apollo Global Management, which had bought $800mn in bonds issued by Carvana in 2022 at par, would take a significant loss should it decide to participate in the restructuring.

Participation is voluntary and Carvana says that for the deal to close, at least $500mn of new debt will have to be issued. The kind of restructuring the company is proposing can often serve as a prelude to the renegotiation terms or an entirely different agreement.

Carvana released preliminary first-quarter results alongside the terms of the exchange, which showed that a cost-cutting plan — including a reduction in headcount from 21,000 to 17,000 over the past year — is starting to bear fruit as the company's massive cash burn is starting to shrink, with EBITDA expected to come between ($50MM) and ($100MM), an improvement to the ($348MM) EBITDA one year ago. Some more details:

  • For the three months ending March 31, 2023, we expect retail units sold to be between 76,000 and 79,000 units, compared to 105,185 retail units sold for the three months ended March 31, 2022. This reduction in retail units sold is primarily driven by higher interest rates, lower inventory size, lower advertising expense, and our focus on profitability initiatives.
  • For the three months ending March 31, 2023, we expect total net sales and operating revenues to be between $2.4 billion and $2.6 billion, compared to total net sales and operating revenues of $3.5 billion for the three months ended March 31, 2022. The decrease in total net sales and operating revenues is primarily driven by the reduction in retail units sold.
  • For the three months ending March 31, 2023, we expect gross profit, non-GAAP to be between $310 million and $350 million, compared to gross profit, non-GAAP of $314 million for the three months ended March 31, 2022. The change in gross profit, non-GAAP is primarily driven by higher total gross profit per retail unit sold offset by lower retail units sold.
  • For the three months ending March 31, 2023, we expect total gross profit per unit, non-GAAP to be between $4,100 and $4,400, compared to total gross profit per unit, non-GAAP of $2,985 for the three months ended March 31, 2022. The increase in total gross profit per unit is due to higher retail gross profit per unit, primarily driven by the benefit of a lower inventory allowance adjustment, higher wholesale gross profit, primarily driven by strong wholesale market demand and price appreciation, and higher other gross profit, primarily driven by higher finance receivable, principal sold.
  • For the three months ending March 31, 2023, we expect SG&A, non-GAAP to be between $400 million and $440 million, which excludes approximately $55 million of depreciation and amortization expense and $15 million of share-based compensation expense, compared to SG&A, non-GAAP of $662 million, which excludes $37 million of depreciation and amortization expense and $28 million of share-based compensation expense, for the three months ended March 31, 2022. The reduction in SG&A, non-GAAP is primarily driven by our continued focus on operating efficiency and reduced advertising spend.

For the three months ending March 31, 2023, we expect Adjusted EBITDA to be between $(50) million and $(100) million, compared to Adjusted EBITDA of $(348) million for the three months ended March 31, 2022. The improvement in Adjusted EBITDA is primarily driven by reduced selling, general, and administrative expenses and higher total gross profit per unit, partially offset by lower retail units sold.

Carvana’s market capitalization soared to nearly $50bn in 2021 after customers flush with stimulus cash flocked to its website and vending machines when a global chip shortage and supply chain problems had resulted in a dearth of new vehicles. It sold 425,000 cars that year, up from 245,000 in 2020.

The stock jumped as much as 30% this morning following news of the proposed exchange offer.

Tyler Durden Wed, 03/22/2023 - 09:38

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“What’s More Tragic Is Capitalism”: BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

"What’s More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years…

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May 28, 2023

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"What's More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years ago, I wrote columns about companies pouring money into Black Lives Matter to establish their bona fides as “antiracist” corporations. The money continued to flow despite serious questions raised about BLM’s management and accounting. Democratic prosecutors like New York Attorney General Letitia James showed little interest in these allegations even as James sought to disband the National Rifle Association (NRA) over similar allegations. At the same time, Black Lives Matter co-founder Patrisse Cullors cashed in with companies like Warner Bros. eager to give her massive contracts to signal their own reformed status. It now appears that BLM is facing bankruptcy after burning through tens of millions and Warner Bros. cut ties with Cullors after the contract produced no — zero — new programming.

Some states belatedly investigated BLM as founders like Cullors seemed to scatter to the winds.

Gone are tens of millions of dollars, including millions spent on luxury mansions and windfalls for close associates of BLM leaders.

The usual suspects gathered around the activists like former Clinton campaign general counsel Marc Elias, who later removed himself from his “key role” as the scandals grew.

When questions were raised about the lack of accounting and questionable spending, BLM attacked critics as “white supremacists.”

Warner Bros. was one of the companies eager to grab its own piece of Cullors to signal its own anti-racist virtues.  It gave Cullors a lucrative contract to guide the company in the creation of both scripted and non-scripted content, focusing on reparations and other forms of social justice. It launched a publicity campaign for everyone to know that it established a “wide-ranging content partnership” with Cullors who would now help guide the massive corporation’s new programming. Calling Cullors “one of the most influential thought leaders in American public life,” Warner Bros. announced that she was going to create a wide array of new programming, including “but not limited to live-action scripted drama and comedy series; longform/event series; unscripted docuseries; animated programming for co-viewing among kids, young adults and families; and original digital content.”

Some are now wondering if Warner Bros. ever intended for this contract to produce anything other than a public relations pitch or whether Cullors took the money and ran without producing even a trailer for an actual product. Indeed, both explanations may be true.

Paying money to Cullors was likely viewed as a type of insurance to protect the company from accusations of racial insensitive. After all, the company was giving creative powers to a person who had no prior experience or demonstrated talent in the area. Yet, Cullors would be developing programming for one of the largest media and entertainment companies in the world.

One can hardly blame Cullors despite criticizism by some on the left for going on a buying spree of luxury properties.

After all, Cullors was previously open about her lack of interest in working with “capitalist” elements. Nevertheless, BLM was run like a Trotskyite study group as the media and corporations poured in support and revenue.

It was glaringly ironic to see companies like Warner Bros. falling over each other to grab their own front person as the group continued boycotts of white-owned businesses. Indeed, if you did not want to be on the wrong end of one of those boycotts, you needed to get Cullors on your payroll.

Much has now changed as companies like Bud Light have been rocked by boycotts over what some view as heavy handed virtue signaling campaigns.

It was quite a change for Cullors and her BLM co-founder, who previously proclaimed “[we] are trained Marxists. We are super versed on, sort of, ideological theories.” She denounced capitalism as worse than COVID-19. Yet, companies like Lululemon rushed to find their own “social justice warrior” while selling leggings for $120 apiece.

When some began to raise questions about Cullors buying luxury homes, Facebook and Twitter censored them.

With increasing concerns over the loss of millions, Cullors eventually stepped down as executive director of the Black Lives Matter Global Network Foundation, as others resigned.  At the same time, the New York Post was revealing that BLM Global Network transferred $6.3 million to Cullors’ spouse, Janaya Khan, and other Canadian activists to purchase a mansion in Toronto in 2021.

According to The Washington Examiner, BLM PAC and a Los Angeles-based jail reform group paid Cullors $20,000 a month. It also spent nearly $26,000 on meetings at a luxury Malibu beach resort in 2019. Reform LA Jails, chaired by Cullors, received $1.4 million, of which $205,000 went to the consulting firm owned by Cullors and her spouse, according to New York magazine.

Once again, while figures like James have spent huge amounts of money and effort to disband the NRA over such accounting and spending controversies, there has been only limited efforts directed against BLM in New York and most states.

Cullors once declared that “while the COVID-19 illness is tragic, what’s more tragic is capitalism.” These companies seem to be trying to prove her point. Yet, at least for Cullors, Warner Bros. fulfilled its slogan that this is all “The stuff that dreams are made of.”

Tyler Durden Sun, 05/28/2023 - 16:00

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Biden reaches ‘tentative’ US debt ceiling deal: Report

United States President Joe Biden has urged the United States Congress to “pass the agreement right away.“
Amid growing concerns…

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1 day ago

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May 28, 2023

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United States President Joe Biden has urged the United States Congress to “pass the agreement right away.“

Amid growing concerns of a potential default by early June, United States President Joe Biden and House majority leader Representative Kevin McCarthy have reportedly reached an “agreement in principle” to raise the federal government’s multitrillion-dollar debt ceiling.

According to a May 28 report from Reuters citing two sources familiar with the negotiations, the “tentative” agreement to raise the $31.4 trillion debt ceiling was reached after a 90-minute phone call between Biden and McCarthy on May 27.

Since publication time, Biden has confirmed via Twitter the existence of an “agreement in principle," explaining that it will prevent the U.S. from facing a “catastrophic default.“

Biden noted that “over the next day,” the agreement would go to the U.S. House of Representatives and Senate. He urged both chambers to “pass the agreement right away.“

Meanwhile, McCarthy also took to Twitter to confirm the agreement in principle, alleging that Biden “wasted time and refused to negotiate for months.“

Reuters reported that while “the exact details of the deal were not immediately available,” an agreement has been made to limit the U.S. government’s spending for the next two years, excluding expenses related to national security.

“Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025,” a source familiar with the deal said.

Related: Debt ceiling crisis: Best practices to navigate this market

This comes only weeks after U.S. Treasury Secretary Janet Yellen warned of a default risk as soon as June 1 if the debt limit isn’t suspended or raised, urging Congress to “act as soon as possible.“

Additionally, The U.S. Congressional Budget Office published a report on May 12, emphasizing that if the debt limit remains unchanged, there is a significant risk “that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations.“

In recent times, several analysts have shared a similar view that raising the debt ceiling could see more capital inflow into Bitcoin (BTC).

On May 17, MacroJack, a former Wall Street trader, warned his followers in a tweet that the U.S. debt ceiling talks are “all show.“

He emphasized how important it is to own hard assets as the dollar will be “printed into oblivion,” while stating that Bitcoin is the “fastest horse in the race.“

Meanwhile, Jesse Myers, chief operating officer of investment firm Onramp, reminded his 50,100 Twitter followers of what happened during the COVID-19 pandemic, stating that “Bitcoin was the winner during the last round of stimulus.“

He proposed the idea that history might repeat itself if the debt ceiling were to be raised, as it would prompt the Federal Reserve to print more money.

Update on May 28, 2023, at 03:15: This article has been updated to include United States President Joe Biden's tweet.

Magazine: Visa stablecoin plan, debt ceiling’s effect on Bitcoin price: Hodler’s Digest, April 23-29

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Biden reaches ‘tentative’ US debt ceiling deal: Report

United States President Joe Biden has urged both the United States House and Senate to "pass the agreement right away."
Amid growing…

Published

1 day ago

on

May 28, 2023

By

United States President Joe Biden has urged both the United States House and Senate to "pass the agreement right away."

Amid growing concerns of a potential default by early June, the United States President Joe Biden and Republican Kevin McCarthy have reportedly reached an "agreement in principle" to raise the federal government's multi-trillion dollar debt ceiling.

According to a May 28 report from Reuters, citing two sources familiar with the negotiations, the "tentative" agreement to raise the $31.4 trillion debt ceiling was reached after a 90-minute phone call between Biden and McCarthy on May 27.

Following the publication of this article, Biden has since confirmed via Twitter the existence of an "agreement in principle," explaining that it will prevent the U.S. facing a "catostrophic default."

Biden noted that "over the next day," the agreement will go the U.S. House and Senate. He urged both chambers to "pass the agreement right away."

Meanwhile, McCarthy also took to Twitter to confirm the agreement in principle, alleging that Biden "wasted time and refused to negiotate for months."

Reuters reported that while "the exact details of the deal were not immediately available," an agreement has been made to limit the U.S. government's spending for the next two years, excluding expenses related to national security. 

"Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025" a source familiar with the deal said.

Related: Debt ceiling crisis: Best practices to navigate this market

This comes only weeks after U.S. Treasury Secretary Janet Yellen warned of a default risk as soon as June 1 if the debt limit isn't suspended or raised, urging Congress to "act as soon as possible."

Additionally, The U.S. Congressional Budget Office (CBO) published a report on May 12, emphasizing that if the debt limit remains unchanged, there is a significant risk "that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations."

In recent times, several analysts have shared a similiar view that raising the debt ceiling could see more capital inflow into Bitcoin (BTC)

MacroJack, a former Wall Street trader, warned his followers in a tweet on May 17 that the U.S. debt ceiling talks are "all show."

He emphasized how important it is to own hard assets as the dollar will be "printed into oblivion," while stating that Bitcoin is the "fastest horse in the race."

Meanwhile, Jesse Myers, chief operating officer of investment firm Onramp reminded his 50,100 Twitter followers of what happened during the Covid-19 Pandemic, stating that "Bitcoin was the winner during the last round of stimulus."

He proposed the idea that history might repeat itself if the debt ceiling were to be raised, as it would prompt the Federal Reserve to print more money.

Update on May 28, 2023, at 03:15: This article has been updated to include United States President Joe Biden's tweet.

Magazine: Visa stablecoin plan, debt ceiling’s effect on Bitcoin price: Hodler’s Digest, April 23-29

Read More

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