HomeFinancial MarketsCarvana Co. Stock Jumps 40% After Debt-Restructure Announcement

Carvana Co. Stock Jumps 40% After Debt-Restructure Announcement

Online used car retailer Carvana Co’s stock saw a massive rally on Wednesday amid an announcement that it will restructure its massive debt. The shares have jumped 40%, bringing them to a climb of 1,105.18% since the beginning of the year.

Carvana will exchange current unsecured debt with new notes that will result in lowering interest expenses in the next two years by $430 million annually. The company also intends to sell $350 million in new stock as part of the restructuring and is expecting to reduce its debt by $1.2 billion.

“This transaction significantly increases our financial flexibility by reducing our total debt, extending maturities, and lowering near-term cash interest expense as we continue to execute our plan of driving significant profitability and returning to growth,” said Carvana CFO Mark Jenkins in a statement.

Carvana saw massive growth in 2020 and 2021, which helped its stock climb to an all-time high mark of $360.98 per share in late 2021. Since then, the stock went on a downward trajectory, dropping as low as $3.72 per share in December as investors started bailing out due to the company’s sale declines and mounting debt.

 Things are now looking much better for Carvana, although analysts are not sure that the good times will last for long.

“Carvana’s debt deal is a smart move as the risk that consumption gets crushed in the second half of the year is elevated,” Ed Moya, senior equity analyst at Oanda, told Bloomberg. “Carvana has had a nice ride this year, but it looks like it might be a bumpy ride going forward.”

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