Loan Covenant Compliance — Carvana FY2025

MacrosLM Finance Knowledge

LOAN COVENANTS / HIGH-YIELD CREDIT / CASE: CVNA

§ 04Technical vs financial default · the cascade

A covenant breach doesn't auto-bankrupt the borrower. There's a procedural cascade — cure periods, lender votes, waiver economics, and (if it gets far enough) acceleration. Most breaches are quietly waived. The interesting question is what the borrower pays for the waiver.

Breach cascade · stylised timeline · syndicated credit

Step	Event	Timing	Outcome	Borrower cost
1	Borrower delivers compliance cert showing breach	Within 45 days of Q-end	Technical default declared	Watch-list designation
2	Cure period activates (if granted in indenture)	10 – 30 business days	Borrower may post equity / cash	Cash drag; signal to market
3	Cure fails · lenders invited to waiver vote	Required majority typically 50.1%	Waiver fee negotiated	25–100 bps consent fee
4	Waiver granted with covenant reset	Standard outcome	New cushion — often tighter	Higher coupon · additional reporting
5	Waiver denied — cross-default may trigger	Rare	Bonds + revolver may accelerate	All-in restructuring scenario
6	Acceleration · lenders demand par	Worst case	Negotiation or Chapter 11 prep	DIP financing required

Carvana 2022-23 took the full path through step 5 — cross-default activated across the unsecured-note stack — before the 2023 exchange landed. The current package was negotiated from that experience: it's lender-friendly because the lender remembered.