Carvana Co (NYSE:CVNA)'s fall from grace continued today with shares plunging a further 38.3% as Bloomberg reported that creditors who control about 70% of the group's unsecured debt have agreed for the next three months to act together in negotiations.
Bloomberg said Apollo Group and Pimco, who control around $4 billion of Carvana’s unsecured debt, have formed a pact to try and “prevent creditor fights that have complicated other debt restructurings in recent years.”
The deal prompted analysts at Wedbush to set a $1 price target for the online used car dealer, following a similar move by Morgan Stanley (NYSE:MS) last month, citing rising bankruptcy risks.
READ: Carvana stock falls 13.6% as investors continue to take a wide berth
Analyst Seth Basham wrote: “These developments indicate a higher likelihood of debt restructuring that could leave the equity worthless in a bankruptcy scenario, or highly diluted in a best case.”
Bloomberg pointed out investors have dumped Carvana bonds, which have fallen below 50 cents on the dollar, "an indication that traders believe there is a high probability that they will default.”
Meanwhile, Carvana’s $3.3 billion bond due in 2030 has lost nearly half its value, trading at roughly 42 cents, a far cry from the 79 cents at which it traded in early 2022.
The company, dubbed the "Amazon of used cars" was an investor darling during the pandemic as consumers bought everything online and used car prices soared as car manufacturers’ struggled to meet demand.
But the Arizona-based company has seen its shares plunge nearly 99% in the last 16 months since they closed at a record high of $370.10, wiping around $60 billion off its market value as rising interest rates, supply chain problems and the economic slowdown all hit the company hard.
Contact the author at jeremy@proactiveinvestors.com