(Reuters) -Carvana Co said on Wednesday it expects a smaller core loss in the current quarter as its cost-cut measures have helped mitigate some impact of a decline in used-car sales.
The debt-laden company has taken a series of steps, including job cuts, over the past year to cut costs as it struggles to sell cars acquired at elevated prices, with buyers hit by inflation and worried about a recession cutting spending.
The company's business model became popular during the COVID-19 pandemic, as people opted for readily available used cars instead of newer vehicles whose supply was constrained due to semiconductor shortages.
But a fall in used-car sales, which one analyst has dubbed as a "used-car recession", has pummeled the industry's results over the last few quarters, raising concerns over Carvana's financial health.
To relieve some of its debt concerns, Carvana also said on Wednesday it was offering creditors an option to exchange unsecured notes for those backed by collateral, in a move that will see repayment on some obligations pushed to 2028 from as early as 2025.
The offer would be for a principal amount of up to $1 billion in notes, with a condition that at least $500 million existing notes be validly tendered.
A debtholder group led by Apollo Global Management Inc and Pacific Investment Management Co (PIMCO) that holds most of Carvana's more than $5 billion in bonds will oppose the debt restructuring plan, Bloomberg News reported.
Carvana's shares that had surged as much as 29%, pared gains to 12% in afternoon trade following the report.
Apollo and PIMCO did not immediately respond to Reuters requests for a comment.
As of 2022 end, Carvana had total liabilities of $9.75 billion and assets of about $8.9 billion.
Carvana expects first-quarter core loss between $50 million and $100 million, down from a core loss of $348 million a year earlier, the company said in a regulatory filing.
(Reporting by Aishwarya Nair and Kannaki Deka in BengaluruEditing by Vinay Dwivedi)