Carvana shares soar on deal to reduce debt by $1.2 billion

caravan has reached an agreement with noteholders to reduce the used car retailer’s total outstanding debt by more than $1.2 billion, the company said Wednesday.

Carvana said the agreement will eliminate more than 83% of Carvana’s unsecured note maturities in 2025 and 2027 and reduce its required cash interest expense by more than $430 million annually over the next two years.

The company’s shares surged 30% in premarket trading Wednesday after falling about 7% ahead of the announcement.

Mark Jenkins, Carvana’s chief financial officer, said in a statement: “This transaction, by reducing total debt, extending maturity and lowering near-term cash interest expenses, Significantly increased our financial flexibility.”.

Carvana said its restructuring agreement covered about $5.2 billion in senior unsecured debt, including its largest bondholder, Apollo Global Management. Under the terms of the deal, creditors will receive new secured notes.

The agreement was announced simultaneously with the company’s Earnings for the second quarter.

Carvana’s debt prior to the transaction was approximately $8.5 billion, of which $5.7 billion, or 74.5%, was in unsecured notes.

Carvana has been working on such a deal for more than a year, as the company’s stock has plummeted amid the coronavirus pandemic amid a heavy debt load and mismanagement.

This is a story of development. Please check back for additional updates.