Carvana, which promised to reinvent the business of selling used cars, has never turned a profit and has borrowed money to cover its losses, WSJ Pro reported. Carvana Co.’s bonds are touching all-time lows, spotlighting investors’ concerns about the used-car seller’s long-term trajectory as it burns cash and faces rising borrowing costs. Carvana’s long-term bonds have declined to distressed levels, with some now trading as low as 33 cents on the dollar on Wednesday, a sign that investors don’t believe they will be paid back in full. The yield on their 10.25% notes was over 30% as of Tuesday, according to MarketAxess, a sign that Carvana would struggle to borrow from bond markets presently. The used-car business thrived when people opted to drive to avoid mass transportation during the pandemic. But car prices have dropped as interest rates went up and concerns over a recession grew, denting the company’s growth prospects. The company, which promised to reinvent the business of selling used cars, has never turned a profit and has borrowed money to cover its losses. The bonds had already dropped this year as the Federal Reserve started to raise interest rates in March. But they slid around 25% after Carvana’s latest earnings report on Friday, indicating that investors have become more pessimistic about the company’s fundamentals, rather than following broader market moves.
