Peloton, the popular connected fitness company, is facing a cash crunch as its sales continue to decline. In an effort to address this issue, Peloton has announced a “global refinancing” plan. This includes offering $275 million in convertible senior notes due 2029 in a private offering, as well as entering into a $1 billion five-year term loan and a $100 million revolving credit facility.
The proceeds from this refinancing plan will be used to repurchase approximately $800 million of Peloton’s existing 0% convertible senior notes, which are set to mature in 2026. Additionally, the company plans to refinance its current term loan. These measures are aimed at improving Peloton’s cash position and aligning its spending with its revenue.
The announcement of the refinancing plan caused Peloton’s shares to drop more than 12% in extended trading. However, the stock later regained some ground. This decline in share price reflects investors’ concerns about the company’s financial situation and its ability to maintain sales growth.
Peloton has been facing challenges in recent months, including the departure of its CEO Barry McCarthy and the decision to lay off 15% of its workforce. These measures were necessary to bring the company’s spending in line with its revenue and improve its cash flow. The goal is to make Peloton a more attractive borrower and successfully refinance its debt.
In a letter to shareholders, Peloton expressed its awareness of the timing of its debt maturities, including convertible notes and a term loan. The company is working closely with its lenders at JPMorgan and Goldman Sachs to develop a refinancing strategy. The aim is to deleverage and extend maturities at a reasonable cost of capital.
Despite the challenges Peloton is currently facing, the company remains optimistic about its future. It has received support and interest from existing lenders and investors, which bodes well for its refinancing efforts. Peloton is committed to sharing more information about its refinancing goals in the future.
In conclusion, Peloton’s decision to pursue a global refinancing plan reflects its efforts to address its cash crunch and improve its financial situation. By repurchasing existing convertible senior notes and refinancing its term loan, Peloton aims to strengthen its cash position and align its spending with its revenue. While the announcement initially caused a decline in share price, the company remains optimistic about its ability to successfully refinance its debt and continue its growth trajectory.
