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Shares of Carvana plummeted by more than 40% during trading Wednesday following the company’s largest creditors reportedly signing a deal that binds them to act together in negotiations.
The pact, as reported by Bloomberg, includes creditors that hold around $4 billion of Carvana’s unsecured debt, or around 70% of the total outstanding.
Shares of Carvana were trading below $5 a share for the first time since the company went public in 2017.

Shares of Carvana plummeted by more than 40% during trading Wednesday after the embattled online used car retailer’s largest creditors signed a deal binding them to act together in negotiations with the company.
The pact, as first reported by Bloomberg, includes creditors such as Apollo Global Management and Pacific Investment Management that hold around $4 billion of Carvana’s unsecured debt, or about 70% of the total outstanding. The agreement will last at least three months.

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Such creditor agreements are viewed as a way to streamline negotiations around new financing or a debt restructuring. They have assisted in preventing creditor fights that have complicated other debt restructurings in recent years.
A person with knowledge of the situation who is not authorized to speak publicly on the matter confirmed details of the deal Wednesday to CNBC. They downplayed the deal signaling any increased concerns for bankruptcy, citing the company’s meaningful liquidity runway.
Following the creditor deal, Wedbush analyst Seth Basham said Wednesday that bankruptcy is becoming more likely for Carvana and downgraded its stock to underperform from neutral and slashed his price target to $1 from $9 per share.

Ernest Garcia III, CEO of Carvana, speaks to CNBC on the floor of the New York Stock Exchange, March 7, 2019.
Brendan McDermid | Reuters

JPMorgan said Wednesday that the creditor deal signals that Carvana “may have initiated debt restructuring negotiations with bond holders” but the “possibility of imminent Ch. 11 filing seems low.”
“We believe CVNA has enough cushion through shortterm revolvers to get through till end of 2023, and a severe recession could accelerate this by 1-2 quarters,” Rajat Gupta said in an investor note.

Carvana did not immediately respond for comment. Pimco and Apollo declined to comment.
Trading of Carvana shares was briefly halted Wednesday morning after the stock fell below $5 a share for the first time since the company went public in 2017. The stock continued to fall throughout the day, closing down by about 43% at $3.83 per share.
Carvana’s stock has plummeted by about 97% this year after reaching an all-time intraday high of $376.83 per share on Aug. 10, 2021. The company’s market cap is now $723 million, down from $60 billion during its peak last year.
Carvana has received a litany of analyst downgrades since the company reported disappointing third-quarter earnings last month and gave a bleak outlook.
The company grew exponentially during the coronavirus pandemic, as shoppers shifted to online purchasing rather than visiting a dealership, with the promise of hassle-free selling and purchasing of used vehicles at a customer’s home.

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But Carvana did not have enough vehicles to meet the surge in consumer demand or the facilities and employees to process the vehicles it did have in stock. That led Carvana to purchase Adesa and a record number of vehicles amid sky-high prices as demand slowed amid rising interest rates and recessionary fears.
Carvana has repeatedly borrowed money to cover its losses and growth initiatives, including an all-cash $2.2 billion acquisition earlier this year of Adesa’s U.S. physical auction business from KAR Global.
Last week, Bank of America downgraded Carvana to neutral, saying that the company badly needs more liquidity as it struggles to turn profitable. Analyst Nat Schindler said the company “is likely to run out of cash by the end of 2023. There is no indication yet of a potential cash infusion.” 
And last month, Morgan Stanley pulled its rating and price target for the stock. Analyst Adam Jonas cited deterioration in the used car market, company’s debt and a volatile funding environment for the change. He also said the company’s stock could be worth as little as $1.
— CNBC’s Michael Bloom contributed to this report.

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The Chinese government’s move Wednesday to further roll back strict Covid-19 measures should boost the prospects for a host of Club holdings with substantial operations in China, including Estee Lauder (EL), Wynn Resorts (WYNN) and Starbucks ( SBUX), all of which have been weighed down by nearly three years of lockdowns. The news China’s National Health Commission on Wednesday said people will now be able to travel throughout the country without showing a negative Covid test or health code. The new rules also allow those with mild or asymptomatic Covid cases to quarantine at home, rather than at designated facilities. Additionally, local authorities will no longer be able halt work or production unless an area is designated as high-risk. Beijing’s decision to further ease public-health policies comes a little more than a week after protests erupted in China over the government’s draconian zero-Covid policy, an approach that has severely restricted citizens and pressured the world’s second-largest economy. China has taken minor steps in recent months to ease its Covid restrictions, but Wednesday’s announcement amounts to the most significant policy shift to date. Impact on Club stocks Club stocks with China exposure largely followed the broader market lower Wednesday amid a day of choppy trading in equity and energy markets, fueled by growing fears of a recession. But, ultimately, the holdings which rely on China for a substantial portion of revenue — Estee Lauder, Wynn and Starbucks — should see their stock prices ultimately move higher, as China’s economy reopens. For months, we have argued that China’s strict Covid stance was untenable over the long term and eventually a serious pivot toward reopening would materialize, providing much-needed clarity to businesses and helping spur economic activity. As a result, we’ve exercised patience and held onto stocks like Wynn Resorts, which depends heavily on its casinos in the Chinese special administrative region of Macao. At the same time, we also know stocks are forward-looking assets, and decided not to wait for Beijing to to fully roll back restrictions before investing in Estee Lauder, which relies on China for more than a third of total sales. In late September we bought back into the cosmetics giant, and still believe it’s worth buying here. Similar thinking informed our decision to initiate a position in Starbucks in late August . As Wednesday’s announcement likely helps China’s economy to recover, a number of other Club holdings should also see tailwinds. At a high level, our energy stocks — Pioneer Natural Resources (PXD), Coterra Energy (CTRA), Devon Energy (DVN) and Halliburton (HAL) — benefit from elevated crude oil prices. And increased oil demand from the world’s No. 2 economy should ultimately lend support to crude, with knock-on effects for our oil stocks. Apple (APPL) is another potential beneficiary of China’s policy shift. The iPhone maker has faced Covid-related production hold-ups at facilities in China , warning as recently as November about a potential hit to sales. On Wednesday, Morgan Stanley lowered iPhone shipment expectations for the December quarter by 3 million units, after having trimmed forecasts by 6 million units last month, on the back of manufacturing disruptions in China. Chip designer Qualcomm (QCOM) also has warned about the impact of China’s Covid policy, saying that overall macroeconomic weakness in the country has weighed on smartphone demand. Increased economic activity in China could benefit Qualcomm down the road. An uptick in air travel in China could be good news for Club holding Honeywell International (HON) and its already strong aerospace business . The industrial firm makes parts for Boeing (BA) and European rival Airbus, both of which operate in the Chinese market. Honeywell also has a large commercial aerospace aftermarket business that has benefited from a recovery in international air traffic. China is Procter & Gamble ‘s (PG) second-largest market outside the U.S. and its been weighed down by Covid lockdowns. The maker of Olay skin care products and Gillette razors continues to bet on China, but management has said it needs consumer mobility to recover so long-term growth trends can resume. Bottom line China’s decision to further ease Covid protocols is positive and we expect further reopening measures to be enacted down the line. Of course, Beijing has not officially dropped its so-called zero-Covid stance, and it’s possible there could be temporary setbacks in response to a surge in cases. But Wednesday’s announcement, nonetheless, signals an important development for Club stocks with China exposure. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Although domestic travel in China continues to be jeopardized by Covid-19 outbreaks and lockdowns, international flights have doubled since June.
Bloomberg | Bloomberg | Getty Images

The Chinese government’s move Wednesday to further roll back strict Covid-19 measures should boost the prospects for a host of Club holdings with substantial operations in China, including Estee Lauder (EL), Wynn Resorts (WYNN) and Starbucks (SBUX), all of which have been weighed down by nearly three years of lockdowns. More

Candymaker Ferrero is buying Wells Enterprises, the ice cream giant that owns Blue Bunny, Blue Ribbon Classics and Halo Top.
Wells Enterprises was founded in 1913 and has grown to be the second-largest ice cream company in the U.S., trailing only Ben & Jerry’s owner Unilever.
The two privately held companies did not disclose financial terms of the deal.

Halo Top pints of ice cream in Los Angeles, California.
Kirk Mckoy | Los Angeles Times | Getty Images

Candy maker Ferrero is buying Wells Enterprises, the ice cream giant that owns Blue Bunny, Blue Ribbon Classics and Halo Top.
The two privately held companies did not disclose financial terms of the deal in their announcement on Wednesday. The transaction is expected to close in early 2023.

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Honeywell is well-positioned to capitalize on pockets of strength in the economy

Ferrero’s portfolio already includes Kinder, Tic Tac and Nutella, but the European company has been pushing into North America through acquisitions over the last five years. It bought Fannie May Confections Brands in 2017 and Nestle’s U.S. candy business and Kellogg’s cookies and fruit snacks division in 2018.
Comfort food staples like ice cream and candy saw their sales soar during the pandemic as consumers looked for ways to treat themselves. The National Confectioners Association said retail sales of chocolate and other candy hit a record $36.9 billion last year. For its part, Ferrero reported global consolidated revenue of 12.7 billion euros ($13.3 billion) in its fiscal year ended Aug. 31, 2021.
Mike Wells, a third-generation member of the founding family and current chief executive, will serve as an adviser on the transition. Wells President Liam Killeen will succeed him as CEO, but the rest of the existing leadership team is expected to remain.
Wells Enterprises was founded in 1913 and has grown to be the second-largest ice cream company in the U.S., trailing only Ben & Jerry’s owner Unilever. Wells makes more than 200 million gallons of ice cream annually and has more than 4,000 employees.

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The order goes into effect next summer and is the last of several measures stemming from a 1999 lawsuit.
The order effects Altria, ITG Brands LLC, R.J. Reynolds Tobacco Co. and Philip Morris USA. 

Altria’s Marlboro cigarettes sold at a store.
Simon Dawson | Bloomberg | Getty Images

Major cigarette companies will soon be required to post signs at retail locations warning of the health effects of smoking, the Justice Department announced.
The order, set to go into effect on July 1, 2023, is the last in a broader series of court-ordered measures stemming from a 1999 lawsuit against cigarette companies, the department said in a release.

The order requires defendants Altria, Philip Morris USA Inc., R.J. Reynolds Tobacco Company, and four cigarette brands owned by ITG Brands to display the signs for two years. Representatives for the companies did not immediately respond to requests for comment.
“Justice Department attorneys have worked diligently for over 20 years to hold accountable the tobacco companies that defrauded consumers about the health risks of smoking,” said Associate Attorney General Vanita Gupta in a statement.
The retail signs will be “designed to be eye-catching” and will include warnings such as “Smoking cigarettes causes numerous diseases and on average 1,200 American deaths every day” and “The nicotine in cigarettes is highly addictive and that cigarettes have been designed to create and sustain addiction.”
The order stems from lawsuit filed in 1999 in the U.S. District Court for the District of Columbia by a coalition of anti-tobacco and public-health advocacy groups. It resulted in a ruling that the cigarette companies were defrauding consumers about the health dangers associated with cigarette smoking. 
As part of earlier court orders, similar health warning statements in 2017 began appearing in newspaper and TV ads, on cigarette packages and on the companies’ websites. The retail signs were the subject of several appeals before an agreement on them was reached this past May, the Justice Department said.

The order will apply to about 200,000 U.S. retail locations that have merchandising agreements with the cigarette companies, according to the department. The companies will have to amend their retailer contracts, then manufacture and distribute the required signs within six months of the order’s start date.
The order comes as e-cigarette maker Juul Lab this week settled litigation accusing it of deceptive marketing and sales practices. The company, which is owned in part by Altria, said it reached settlements covering more than 5,000 cases with nearly 10,000 plaintiffs.
As a part of the resolutions, Juul will compensate those struggling with nicotine addiction and fund programs aimed at countering youth nicotine usage.

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McDonald’s holiday promotion this year includes the chance to win free food for life for you and three friends.
The three-week-long promotion, which began Monday, is part of the company’s broader digital strategy to drive traffic to its mobile app without sacrificing profitability.
A little more than a year after its U.S. launch, McDonald’s loyalty program has 25 million members who have been active on the company’s mobile app over the previous 90 days, as of Sept. 30.

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Last holiday season, McDonald’s leaned on singer Mariah Carey’s star power and discounts to drive customers to its mobile app.
This year, the Chicago-based restaurant giant is going further, giving customers the chance to win free McDonald’s for life for themselves and three of their friends with every mobile order. The chain is also offering exclusive access to branded merch releases and deals on food, like a 50-cent double cheeseburger.

The three-week-long promotion, which began Monday, is part of the company’s broader digital strategy to drive traffic to its mobile app through seasonal promotions and create recurring revenue without sacrificing profitability.
In recent years, restaurant companies have turned to loyalty programs to drive downloads of their mobile apps and convince customers to keep coming back. McDonald’s CEO Chris Kempczinski said in late October that roughly two-thirds of U.S. customers who used the app in the last year had been active on it in the previous 90 days.
Tariq Hassan, chief marketing and customer experience officer for McDonald’s U.S. division, told CNBC that app users are “more meaningful and more profitable” than other customers.
A little more than a year after its U.S. launch, McDonald’s loyalty program has 25 million members who had been active on the company’s mobile app over the prior 90 days, as of Sept. 30.
For comparison, Starbucks, which has had a loyalty program for more than a decade, reported 28.7 million active U.S. members during its latest quarter. Chipotle Mexican Grill’s 3-year-old rewards program has 30 million members, although the chain doesn’t disclose how many have been active over the last three months.

‘Boring’ creativity

Hassan, who joined McDonald’s more than a year ago after a stint at Petco, said that roughly 40% of digital customers start using its app thanks to marketing and paid media. The fast-food giant has been getting creative, pushing beyond advertising and discounts to attract new app users, particularly through promotions pegged to the time of year.
For example, the company held “Camp McDonald’s” for four weeks this summer. The program included discounts on its menu items, virtual concerts and limited-edition merch collaborations for mobile app users.
Hassan said the company had a goal of adding 2 million app users during the virtual camp but didn’t share how many members it actually added. (The promotion also angered some customers when issues with the third-party site resulted in hourslong virtual queues to buy a Grimace-themed pool float that sold out.)
Still, McDonald’s digital strategy isn’t mean to be flashy. Hassan said he’s told his team to be comfortable being “boring.”
“You don’t change your strategy just to change it, to do the new and exciting thing,” he said.
One way McDonald’s has gotten comfortable being boring is through its menu. In the early days of the Covid pandemic, like so many other restaurant chains, McDonald’s scaled back its offerings, eliminating items like parfaits and salads, to focus on classic items like the Big Mac and McNuggets. The move away from limited-time menu items proved successful, fueling U.S. sales growth even as lockdowns lifted and consumers resumed their old routines.
McDonald’s digital promotions have also leaned on core menu items. Celebrity meals in 2020 and 2021 put a spotlight on the favorite orders of musicians such as rapper Saweetie, featuring classic menu items like French fries and cheeseburgers.
“When you have that kind of strategic consistency, it gives you more time to wrap those windows with really interesting, exciting and unexpected experiences,” Hassan said.

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Southwest suspended dividends at the start of the pandemic in 2020.
The 18-cent dividend will be paid on Jan. 31.
Pandemic aid had prohibited airlines from paying dividends or buying back shares through Sept. 30.

OntheRunPhoto | iStock Editorial | Getty Images

Southwest Airlines is reinstating its quarterly dividend that it suspended at the start of the Covid-19 pandemic in 2020, the latest sign of the airline industry’s recovery.
The $54 billion in federal aid that airlines received to keep paying employees during the pandemic prohibited dividends and share buybacks, restrictions that lifted this fall.

The 18-cent dividend will be paid after the market closes on Jan. 31., Southwest said in a filing Wednesday, ahead of an investor presentation.
U.S. airlines have returned to profitability and CEOs been upbeat about continued travel demand, even while business leaders in other industries including banking and technology have warned about economic weakness.
“Today’s announcement reflects the strong return in demand for air travel and the Company’s solid operating and financial results since March 2022,” said Southwest CEO Bob Jordan in a news release.
Southwest reiterated that it expects fourth-quarter revenue to be up as much as 17% over 2019, before the pandemic, a sign higher fares continue to drive airlines’ recovery.
The Dallas-based airline said it expects to grow capacity next year by up to 15% compared with 2022.
Southwest’s investor presentation is scheduled to begin at 12 p.m. ET and executives will likely be questioned about costs, pilot hiring, pending labor contracts and expectations for when Boeing’s 737 Max 7 plane could be certified by regulators.

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Mortgage application volume fell 1.9% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Applications to refinance a home loan rose 5% for the week but were still 86% lower than the same week one year ago.
Mortgage applications to purchase a home fell 3% for the week and were 40% lower than the same week one year ago.

A “For Sale” sign in front of a home in Sacramento, California, on Monday, Dec. 5, 2022.
David Paul Morris | Bloomberg | Getty Images

Lower mortgage rates are pulling some current homeowners back to the refinance market, but not enough to offset the drop in demand from homebuyers.
Mortgage application volume fell 1.9% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 6.41% from 6.49%, with points decreasing to 0.63 from 0.68 (including the origination fee) for loans with a 20% down payment. That is 73 basis points lower than it was a month ago but still more than three full percentage points higher than it was a year ago.
Applications to refinance a home loan rose 5% for the week but were still 86% lower than the same week one year ago. There are still precious few current borrowers who can benefit from a refinance at today’s higher interest rates. The refinance share of mortgage activity increased to 28.7% of total applications from 26.1% the previous week.
Mortgage applications to purchase a home fell 3% for the week and were 40% lower than the same week one year ago.
“Purchase activity slowed last week, with a drop in conventional purchase applications partially offset by an increase in FHA and USDA loan applications,” noted Joel Kan, an MBA economist in a release.
The average loan size for homebuyer applications decreased to $387,300 — its lowest level since January 2021, which is consistent with slightly stronger government applications and a rapidly cooling home-price environment, according to Kan.
Mortgage rates haven’t moved much this week, with no significant economic news making headlines. The next big shift will likely come next week, with the much-anticipated monthly read on inflation.

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U.K. government says the new partnership will “drive work to reduce global dependence on Russian energy exports.”
The U.K.-U.S. Energy Security and Affordability Partnership, as it’s known, will be directed by a U.K.-U.S. Joint Action Group.
Among other things, the group will undertake efforts to make sure the market ramps up supplies of liquefied natural gas from the U.S. to the U.K.

Rishi Sunak and Joe Biden photographed on the sidelines of the G20 Summit in Indonesia on Nov. 16, 2022.
Saul Loeb | AFP | Getty Images

LONDON — The U.K. and U.S. are forming a new energy partnership focused on boosting energy security and reducing prices.
In a statement Wednesday, the U.K. government said the new partnership would “drive work to reduce global dependence on Russian energy exports, stabilise energy markets and step up collaboration on energy efficiency, nuclear and renewables.”

The U.K.-U.S. Energy Security and Affordability Partnership, as it’s known, will be directed by a U.K.-U.S. Joint Action Group headed up by officials from both the White House and U.K. government.
Among other things, the group will undertake efforts to make sure the market ramps up supplies of liquefied natural gas from the U.S. to the U.K.

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“As part of this, the US will strive to export at least 9-10 billion cubic metres of LNG over the next year via UK terminals, more than doubling the level exported in 2021 and capitalising on the UK’s leading import infrastructure,” Wednesday’s announcement said.
“The group will also work to reduce global reliance on Russian energy by driving efforts to increase energy efficiency and supporting the transition to clean energy, expediting the development of clean hydrogen globally and promoting civil nuclear as a secure use of energy,” it added.
Commenting on the plans, U.K. Prime Minister Rishi Sunak said: “We have the natural resources, industry and innovative thinking we need to create a better, freer system and accelerate the clean energy transition.”

“This partnership will bring down prices for British consumers and help end Europe’s dependence on Russian energy once and for all.”
The news comes at a time of huge disruption within global energy markets following Russia’s invasion of Ukraine in February.

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The Kremlin was the biggest supplier of both natural gas and petroleum oils to the EU in 2021, according to Eurostat, but gas exports from Russia to the European Union have been signifciantly reduced this year. The U.K. left the EU on Jan. 31, 2020.
Major European economies have been trying to reduce their own consumption and shore up supplies from alternative sources for the colder months ahead — and beyond.
Top CEOs from the power industry have forecast that turbulence in energy markets is likely to persist for some time. “Things are extremely turbulent, as they have been the whole year, I would say,” Francesco Starace, the CEO of Italy’s Enel, told CNBC last month.
“The turbulence we’re going to have will remain — it might change a little bit, the pattern, but we’re looking at one or two years of extreme volatility in the energy markets,” Starace added. More