Carvana Co.’s CVNA debt swap is “distressed” and “tantamount to default” if completed because it will result in bondholders receiving less than originally promised, S&P Global ratings analysts said Thursday. They lowered their rating on Carvana’s debt to CC, from CCC+, with a negative outlook. The outlook “reflects our expectation that we will lower our issuer credit rating on the company to ‘D’ (default) upon the completion of the proposed exchange offer,” S&P said. “Shortly after restructuring, we would raise the ratings to a level that reflects the ongoing risk of a conventional default or future distressed restructurings.” Carvana is pursuing the deal because its capital structure “is unsustainable and the company has limited options to reduce its debt burden and improve its cash flow organically,” S&P said. The car retailer on Wednesday updated its fiscal first-quarter guidance and launched a bond swap of up to $1 billion to stave off its cash burn. The swap reportedly lacks support from the majority of the bondholders. Carvana stock is down 94% in the past 12 months, compared with a decline of around 10% for the S&P 500 index. SPX
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