SEC Filings

Carvana Swaps 9% Notes For A $1.66 Billion Floating-Rate Loan, Hedged Only To 2028

The Term Loan B runs to 2033, but the interest-rate swap ends July 31, 2028, as profit per car slipped.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

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Carvana Swaps 9% Notes For A $1.66 Billion Floating-Rate Loan, Hedged Only To 2028

Carvana, the online used-car retailer, replaced $1.66 billion of 9% senior secured notes with a floating-rate term loan, and its swap fixes the rate on only part of the loan's life, according to its 10-Q filed Wednesday. The loan matures August 14, 2033; the hedge ends July 31, 2028.

A hedge that stops five years short

The Term Loan B was drawn on August 14, 2026 at Term SOFR plus 2.25%, with a 0.00% floor. Carvana's swap has it paying a fixed 4.055% and receiving one-month Term SOFR, on an initial notional of $1.660 billion that shrinks by $4 million a quarter from March 31, 2027 to $1.635 billion.

Because the swap ends before the loan does, the company calls it a partial-term hedge and designated only interest payments through July 31, 2028 as hedged. Principal is repaid at 1% a year with a balloon at maturity, and lenders imposed no financial maintenance tests.

The company used the proceeds and cash on hand to redeem the 2030 notes for $1.711 billion, including a $50 million premium. That produced a $53 million loss on debt extinguishment in the quarter. The prior quarter's 10-Q still showed those notes outstanding. At September 30, the loan carried a net value of $1.639 billion, $12 million of it current.

Profit per car slips as units surge

Retail units rose 39.4% to 217,385 in the third quarter, and revenue climbed to $8.040 billion from $5.647 billion. Adjusted EBITDA rose to $800 million from $637 million, but the margin fell to 10.0% from 11.3%.

Total gross profit per retail unit was $6,997 against $7,362 a year earlier; for nine months it was $6,936 against $7,252. In its earnings letter, Carvana attributed the drop mainly to lower loan rates for customers relative to benchmarks, and said fuel prices and rising benchmark rates cost about $200 per unit. Net income was $483 million.

Carvana sells used cars online, buys them from customers, arranges financing and delivers to homes or vending machines. Profit from selling loans can swing in the short term, the filing warns, because benchmark-rate moves can widen or narrow the spreads it earns.

Outlook guidance is going away

Carvana expects fourth-quarter retail units to rise sequentially and adjusted EBITDA at the higher end of its $2.7 billion to $3.0 billion range for 2026. Beginning with the fourth-quarter earnings call, it does not plan to provide quarterly or annual financial outlooks. In 2027 it plans to shift its main reporting to standard accounting measures.

The fourth-quarter call will be the first without a company outlook, and Carvana is scheduled to hold its third-quarter call at 5:30 p.m. Eastern on Wednesday.

Sources

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