S&P drops Carvana to D

S&P said it lowered Carvana Co.’s issuer and senior unsecured debt ratings to D from CC and C, respectively.

Carvana completed the debt restructuring it announced in July. It exchanged about $5.5 billion of senior unsecured notes due 2025 through 2030 for about $4.2 billion of senior secured notes due 2028 through 2031.

“We view the exchange on all of the debt tranches as a distressed exchange because swapping parties received less than originally promised and had their maturities extended without adequate compensation. Furthermore, holdouts of the exchange were primed by the new senior secured notes. We believe the company conducted the transaction out of distress rather than opportunistically due to its high-interest burden, minimal cash flow generation, and deteriorating liquidity position,” S&P said in a press release.

The agency said it plans to reevaluate Carvana’s ratings based on its new capital structure. “Our analysis will continue to capture the risks of the company's high debt load, weak earnings profile, and potential likelihood of future distressed debt restructurings.”

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