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Carvana debt drama.
Online used car retailer plans to restructure debt
The Fed has raised rates by 25 basis points. Never mind that banks are already sitting on $620 billion of unrealized losses related to the increase in rates. Like a child sitting on a swing, Fed chairman Jerome Powell demands to go higher.
The lowdown
🆙 Fed raise rates by a quarter point despite turmoil in banking sector.
🎈 UK inflation rises to 10.4% reversing three-month trend downwards.
Flex your finance muscle
Source: The Economist
The Big Mac index
The Big Mac index is a way of measuring the relative purchasing power of different currencies around the world based on the price of a Big Mac. The index was created by The Economist in 1986 as a tongue-in-cheek way of comparing the prices of goods across different countries.
The idea is that, as a standardized product sold in over 100 countries, the Big Mac’s price can be used as a comparison of the cost of living in different places. The index compares the price of a Big Mac in local currencies, and then converts those prices into US dollars using the current exchange rate. It then provides a rough estimate of the purchasing power of different currencies.
One problem of the index is that a Big Mac is not as standard as you might think. For instance, in India, where eating beef is mostly illegal, the Big Mac is known as the Maharaja Mac and is made with chicken.
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Credit: Armando L. Sanchez/Tribune News Service/Getty Images
Carvana plans to restructure debt
Online used car retailer Carvana announced its plans to restructure some of its $9 billion debt load. The company is offering noteholders the option to exchange their unsecured notes for new secured notes at a premium to current trading prices – the debt trades at 40-55 cents on the dollar ($).
Carvana did well early in the pandemic when chip shortages meant the supply of new cars could not meet demand. 2022, however, was not a good year for the company, with the stock losing around 95% of its value.
If the offer is taken up by bondholders, it will reduce the face value of Carvana's outstanding $5.7 billion of unsecured bond debt by $1.3 billion and its annual cash interest bill by approximately $100 million. Not ideal for bondholders, but it could be worse. You could be a Credit Suisse AT1 holder.
The content we're consuming today
Reuters: Banking turmoil will not be major hit to commodities finance – CFOs.
FT on YouTube: Can sustainable aviation fuel clean up flying? ($).
Off-balance sheet items
Have a look at this interesting but basic recipe for thin burger patties. I cooked these a few hours ago and it was like having a Big Mac in my home (which to me is a good thing).