Carvana debt bills come due with business ‘firmly in retreat’

Carvana Co. is staring down rising interest payments each of the next three months with vehicle sales and earnings moving in the wrong direction.

After making an ill-timed acquisition just as sales and used-car prices took a turn, the once rapidly growing retailer is “firmly in retreat mode,” Kevin Tynan, a Bloomberg Intelligence auto analyst, said in a note. Carvana shares fell as much as 4.5% to $9.63 before the start of regular trading. Carvana’s biggest problem is its debt, which stands at more than $8 billion with $2.4 billion in cash burn projected over the next two years, according to Levington. “They need to restructure their balance sheet,” he said in a phone interview. “They probably need to shave off 85% of their debt, otherwise they will be a vulnerable company for years.”

“We’ve got a real shot at not requiring additional capital,” Garcia said, citing the company’s real estate portfolio as one potential source of funds. “If we’re wrong, then we have lots of ways to go out and get additional capital.”

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