Seller of Caravan cars announced a decline in sales
2022.12.07 10:28
[ad_1]
Seller of Caravan cars announced a decline in sales
Budrigannews.com – Carvana Co. shares (NYSE:) after Wedbush cut its price target to a Wall Street low of $1 and raised the possibility of the used car retailer defaulting on its debt, which would raise the risk of bankruptcy, the stock fell 40% in morning trade on Wednesday.
Carvana’s shares fell to a record low after broker Wedbush also downgraded its rating on the stock to “underperform” from “neutral.”
Analyst Seth Basham wrote in a note titled “Bankruptcy risk rising” that “many (Carvana) bonds have been trading at about 50 cents on the dollar, indicating investors see a high probability of default.”
This year, Carvana’s bonds have been under pressure, with 2025 notes trading at 45 cents on the dollar—a little bit higher than the record low of 40 cents a month earlier. They were worth 97 cents on the dollar at the beginning of the year.
According to data from Refinitiv, the yield remained at 39.82% in the interim. The yield on 5-year U.S. Treasury notes, on the other hand, was 3.7171 percent.
Bloomberg News reported on Tuesday that Apollo Global Management (NYSE:) was among Carvana’s largest creditors. Pacific Investment Management Co. and Inc. have come to an agreement to work together in any negotiations regarding a restructuring.
Wedbush stated that it believes the developments, in conjunction with the departure of Carvana’s director of investor relations, indicate a higher likelihood of debt restructuring that could “leave the equity worthless in a bankruptcy scenario, or highly diluted at best.”
Due to low demand for used cars and high costs, Carvana has had to lay off employees to cut costs. In the most recent round of job cuts this year, it laid off approximately 1500 workers, or 8% of its workforce, last month.
Consequently, this year’s stock price has dropped nearly one hundred percent, reaching record lows.
