Online used-vehicle retailer Carvana announced better-than-expected second- quarter results and a new debt restructuring deal on Wednesday, July 19.
Analysts lauded the improved results and the flexibility afforded by the deal. But those same analysts and others noted that the debt relief is temporary and the company still reported a significant, if much narrower, loss. Carvana needs to demonstrate its business model can consistently deliver results, they said.
The debt restructuring could buy Carvana some temporary relief. However, the high payment-in-kind coupons for the first two years "will likely put the company back in nearly the same position it was previously absent a meaningful improvement in the business or a redemption of some or all of the new notes," J.P. Morgan analysts wrote.
S&P Global Mobility took a harsher stance, calling the proposed restructuring "distressed and tantamount to default."
While…