By Scott Carpenter
Wed, April 19, 2023

Carvana Co. is preparing to sell $479 million in bonds backed by subprime auto loans, its first offering of asset-backed bonds that aren’t from prime borrowers in over a year.

The online used car dealer has begun marketing the bonds to potential investors and plans to finalize the sale early next week, according to preliminary deal information provided by a person with knowledge of the matter. BNP Paribas SA is the lead underwriter on the debt offering, which is also being run by Deutsche Bank AG and Wells Fargo & Co.

Proceeds from the bond will give the company more cash as it works through a $1 billion debt swap with investors to manage its high leverage. Carvana earlier on Wednesday extended the timeline for its note swap by two weeks after creditors opted to oppose the original terms.

Carvana’s new asset-backed bonds won’t add to its debt burden, since asset-backed securities, once sold, are removed from the balance sheet of the company that is selling them. The company will use the proceeds to pay down existing debt and for general operating purposes, according to a report by Kroll Bond Rating Agency, one of the three ratings groups that’s assigned preliminary AAA ratings to the top tranche of the deal.

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