| Item 1.01 | Entry into a Material Definitive Agreement. |
Issuance of Senior Notes due 2030
On May 6, 2022 (the “Closing Date”), Carvana Co. (the “Issuer”) issued $3.275 billion of its 10.2500% Senior Notes due 2030 (the “Notes”). The offering and sale of the Notes were made only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or, outside the United States, to persons other than “U.S. persons” in compliance with Regulation S under the Securities Act. The Notes were newly-issued under an indenture (the “Indenture”), dated as of the Closing Date, entered into by and among the Issuer, each of the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
Interest and Maturity
The Notes will accrue interest at a rate of 10.2500% per annum, payable in cash semi-annually, in arrears, on May 1 and November 1 of each year, beginning on November 1, 2022. The Notes will mature on May 1, 2030, unless earlier repurchased or redeemed.
Guarantees, Security and Ranking
The Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of the Issuer’s direct or indirect wholly-owned, existing domestic subsidiaries (other than the Issuer’s subsidiaries formed solely for the purpose of facilitating its securitizations and receivables financings) (the “Initial Guarantors”), including certain subsequently acquired direct or indirect wholly-owned domestic subsidiaries of ADESA, Inc. (“ADESA”) that hold real property upon consummation of the acquisition of the U.S. physical auction business of ADESA (the “ADESA Guarantors” and, together with the Initial Guarantors, the “Guarantors”). The Notes are the Issuer’s and the Guarantors’ senior unsecured obligations. The Notes and the guarantees rank equally in right of payment with all of the Issuer’s and the Guarantors’ existing and future senior indebtedness. The Notes and the guarantees rank effectively junior to all of the Issuer’s and the Guarantors’ secured obligations to the extent of the value of the collateral securing such obligations. The Notes and the guarantees will rank senior in right of payment to any of the Issuer’s and the Guarantors’ future indebtedness that is expressly subordinated to the Notes or guarantees. The Notes and the guarantees rank structurally junior to any indebtedness and other liabilities of the Issuer’s subsidiaries that are not Guarantors of the Notes.
Redemption
The Issuer may redeem some or all of the Notes on or after May 1, 2027 at the redemption prices set forth in the Indenture plus accrued and unpaid interest, if any, to the date of redemption.
Prior to May 1, 2025, the Issuer may redeem up to 35.0% of the aggregate principal amount of the Notes at a redemption price equal to 110.2500%, together with accrued and unpaid interest, if any, to, but not including, the date of redemption, with the net cash proceeds of certain equity offerings.
The Issuer may, at its option, redeem in the aggregate up to 10% of the original aggregate principal amount of the Notes during the period from, and including, May 1, 2025 to, but excluding May 1, 2027, at a redemption price equal to 105.125% of the Notes to be redeemed, plus accrued and unpaid interest thereon to the relevant redemption rate.
In addition, the Issuer may, at its option, redeem some or all of the Notes prior to May 1, 2027 by paying a make-whole premium, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.
If the Issuer experiences certain change of control events, it will make an offer to purchase all of the Notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.
