(Bloomberg) — Carvana Co. is consulting with lawyers and investment bankers about options for managing its debt load as plunging used car prices and the company’s swift cash burn threaten its future solvency.
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The online car seller has spoken with advisers at Kirkland & Ellis and Moelis & Co., according to people with knowledge of the matter, who asked not to be identified talking about confidential discussions. Carvana is considering possibilities while some of its largest creditors are banding together to negotiate as a bloc with the company.
Representatives for Kirkland & Ellis, Moelis and Carvana didn’t comment.
Funds including Apollo Global Management Inc. and Pacific Investment Management Co. have signed a cooperation agreement, Bloomberg reported on Tuesday. The holders have about $4 billion of Carvana’s unsecured debt, or around 70% of the total outstanding, and the pact will last a minimum of three months.
Carvana’s bonds have fallen below 45 cents on the dollar and have been at distressed levels for months, indicating that investors believe the company is at a high probability of default.
Tempe, Arizona-based Carvana, a one-time hedge fund darling, has seen its stock plunge about 98% this year because of investor concerns over its long-term prospects. The company’s shares dropped more than 37% to $4.19 on Wednesday after Bloomberg reported on the creditor agreement.
The company has posted net losses every quarter since it went public except for one, and its operating cash flow has been negative for every quarter except one.
(Updates with share prices in sixth paragraph.)
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