(Bloomberg) -- A group of funds holding most of Carvana Co.’s more than $5 billion in bonds will oppose a restructuring plan that the online auto seller wants as a way to rein in its debt load, according to people with knowledge of the group’s position.

Carvana said Wednesday it would offer to exchange as much as $1 billion of its unsecured bonds at discount prices in an effort to extend looming repayment deadlines. The company in the past year suffered mounting losses, and in the last quarter burned through $1.8 billion in cash as sales tumbled 23%. 

Bondholders that banded together late last year to negotiate with Carvana see the new proposal as a nonstarter, according to the people with knowledge, who asked not to be named discussing private deliberations. Together, the group holds more than 80% of Carvana’s debt, putting it in a position to block debt restructuring efforts. 

Carvana shares, which had surged as much as 29%, pared gains to 11% on Wednesday after Bloomberg reported on the opposition. 

The debtholder group, led by Apollo Global Management Inc. and Pacific Investment Management Co., teamed up in December in anticipation of a restructuring of Carvana’s obligations. Their priority was to resist any efforts by the company to pit creditors against creditors, Bloomberg reported at the time. 

PJT Partners Inc., an advisor to the bondholders group, declined to comment, and a spokeswoman for Carvana didn’t respond to a request for comment. Apollo declined to comment. Pimco didn’t immediately respond to requests for comment.

Carvana also said Wednesday it moved its car auction business Adesa U.S. into an unrestricted subsidiary, a maneuver that can lay the groundwork for the future issuance of new debt tied to that brand. Adesa won’t be used to secure the new bonds, according to the Carvana statement.

Still, the market has a precedent for such a move. J. Crew infamously drew investor ire after transferring intellectual property including its brand name into such a unit, and then using that collateral to issue debt. 

--With assistance from Reshmi Basu.

©2023 Bloomberg L.P.