Carvana downgraded to Underperform from Neutral at Wedbush

Wedbush analyst Seth Basham downgraded Carvana to Underperform from Neutral with a price target of $1, down from $9, following a Bloomberg report saying that a group of about 10 creditors holding $4B of the company’s debt have signed a cooperation agreement to present a united front in restructuring negotiations. This move will help avoid the infighting among lenders that has occurred in other restructurings recently, he adds. Separately, the analyst notes that Carvana’s director of investor relations, Mike Levin, recently left the company. Combined with the fact that many Carvana bonds have been trading at 50 cents on the dollar, indicating investors see a high probability of default, he views this news negatively for the Carvana’s shares. The analyst believes these developments indicates a higher likelihood of debt restructuring that could leave the equity worthless in a bankruptcy scenario, or highly diluted in a best case.