CarMax Inc KMX It reportedly began marketing a $1.25 billion bond sale shortly after missing analysts’ fourth-quarter earnings forecasts.
The auto retailer plans to sell the debt through an asset-backed securities offering that could raise up to $1.6 billion, according to a Bloomberg report.
Mitsubishi UFJ Financial Group is arranging the deal, which is expected to be formally announced next week, the report added.
CarMax shares fell significantly, as profits fell short of Wall Street’s expectations.
The company reported earnings per share of 32 cents, significantly below the consensus estimate. The decline is attributed to potential buyers’ hesitancy due to high monthly payments, reflecting concerns about vehicle affordability.
KMX said vehicle affordability challenges continued to impact fourth-quarter unit sales performance, as headwinds remain from widespread inflationary pressures, higher interest rates, tightening lending standards and low consumer confidence.
Despite the earnings setback, CarMax’s entry into the ABS market is not unprecedented, according to the report.
In January it raised $1.55 billion through an ABS offering backed by prime auto loans. Since 2014, CarMax has racked up more than $54 billion in ABS sales, according to data compiled by Bloomberg.
Price action: KMX shares closed 9.23% lower at $71.98 on Thursday.
Disclaimer: This content was partially produced with the help of artificial intelligence tools and was reviewed and published by Benzinga editors.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.