Carvana's new bank loan is the exact size of the cash and PIK notes it is redeeming, to the dollar

The two numbers match to the dollar.

Carvana filed a credit agreement on Friday afternoon for a $1.66bn senior secured term loan B, maturing on August 14, 2033, with Barclays Bank PLC as administrative agent. The proceeds redeem, in whole, the 9.0% / 11.0% / 13.0% Cash / PIK Senior Secured Notes due 2030. Its most recent quarterly report puts the principal amount of its senior secured notes due 2030 at $1,660m on June 30, unchanged from the turn of the year.

So the loan was sized to the debt it retires and nothing else.

What the loan costs

Lenders take the paper at 99.75 percent of face. Interest runs at Term SOFR plus 2.25 percent, or at a base rate plus 1.25 percent, at the company's election. Amortisation is 0.25 percent of the original principal each quarter, which is 1 percent a year, with the balance at maturity in 2033.

The notes being redeemed carried a 9 percent cash rate in the quarterly report's own table. What the loan actually costs against that depends on where Term SOFR sits at each interest period, and neither document states a level, so the comparison is not made here.

The two dates

One billion dollars of the 2030 notes is fixed for redemption on August 15. The remainder is fixed for August 22. August 15 is also one of the two days a year the notes pay interest, per the same quarterly report, and the filings draw no connection between the two.

What comes off with the notes

An indenture goes, and a bank credit agreement replaces it. The new agreement carries no financial covenant, restricts liens, disposals, mergers and restricted payments in the usual way, and sweeps 50 percent of excess cash flow only from the financial year ending December 31, 2028, with that share falling as first lien net leverage falls. Repricing carries a 1 percent premium for six months and prepayment is otherwise free.

The other tranche stays. Senior secured notes due 2031 stood at $2,269m on June 30, at the same 9 percent cash rate, and the 8-K does not mention them.