America’s Car-Mart, Inc. (NASDAQ:CRMT) stock surged Monday after the used-car retailer announced a key amendment to its credit agreement, easing near-term liquidity concerns that had fueled a sharp selloff in recent sessions.
The amendment provides the company with additional financial flexibility following weeks of mounting worries over its liquidity position.
The announcement follows a Bloomberg report that America’s Car-Mart, a used-car retailer and subprime auto lender, had been pursuing an eleventh-hour capital raise to avoid a potential bankruptcy filing after a cash crunch pushed the company to the brink of default, citing people familiar with the matter.
The report added that lenders in the subprime auto finance market have been grappling with challenging conditions as high inflation and elevated interest rates strain lower-credit borrowers.
Lender Agreement Secures Covenant Relief
America’s Car-Mart announced late Friday, that it entered into an amendment to its credit and guaranty agreement with Silver Point Finance, LLC and its lenders.
According to the company press release, the agreement provides covenant relief and waives specified defaults. The initial relief period runs through early September, with an option to extend to November under certain conditions.
Strategic Alternatives Review Underway
The amendment aims to preserve liquidity while a Special Committee of the Board of Directors evaluates financing and strategic alternatives.
“The Amendment provides us the time to evaluate strategic alternatives and pursue an outcome that best serves our stakeholders,” said Doug Campbell, CEO, in the announcement.
CRMT Stock Price Activity: America’s Car-Mart shares were up 29.79% at $3.12 at the time of publication on Monday, according to Benzinga Pro data.
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