Carvana Co.’s bondholders could run against a “tough combination” of rising interest rates and double-digit financing costs, leading some consumers to tap the brakes on buying a used car. That’s from Glenn Reynolds, founder and editor of Macro4Micro and founder and former CEO of research firm CreditSights, in a note Tuesday.
Reynolds also sees further uncertainty in the used-car market fueled by “scarce supply” that could get scarcer amid the ongoing United Auto Workers strike and the potential for new-car sales disruptions slowing trade-ins. Carvana
in July reached an agreement with its bondholders to reduce its debt load, and the stock has skyrocketed more than 700% so far this year on the expectation the online used-car retailer has staved off bankruptcy. In comparison, the S&P 500 index
has advanced around 14% year to date. “For Carvana bondholders, watching the wild price action in [Carvana stocks] was in part a sporting activity (more like Las Vegas), but relative serenity has been seen on the bond pricing side with the exchange offer,” Reynolds said. “Bondholders as a group have worked together to manage their own destiny while [Carvana] stock has been more about speculation around what might be short squeeze effects, what might be long term value seekers with a view, and what could just be meme stock players on a bender.” The bondholder group “ …