A pedestrian walks past a Peloton store in Palo Alto, California, on May 8, 2024.
Justin Sullivan | Getty Images
Peloton the company’s shares fell on Monday after the combined fitness company announced it was embarking on a “global refinancing” to address a cash crunch amid falling sales.
The company is offering $275 million of convertible senior notes in a private placement and plans to have a five-year, $1 billion loan and a $100 million revolving credit facility.
Peloton plans to exploit the proceeds to repurchase approximately $800 million of its 0% convertible senior notes, which currently mature in 2026, and to refinance its existing term loan facility.
Shares fell more than 12% in extended trading after Peloton announced its refinancing, but later regained some ground.
Last month, Peloton announced that its CEO Barry McCarthy was stepping down and said it planned to lay off 15% of its workforce because it “simply has no other way to align its expenses with its revenues.”
The restructuring was aimed at improving Peloton’s cash position as demand for its connected fitness products continues to decline. The company is working to achieve positive free cash flow, which “makes Peloton a more attractive borrower” and “is crucial as the company focuses its attention on the necessary task of successfully refinancing its debt,” McCarthy said in a memo to employees until he left.
In a letter to shareholders, the company said it was “mindful” of the maturities of its debt, which includes convertible notes and a term loan. It said it was working closely with its lenders at JPMorgan and Goldman Sachs on a “refinancing strategy.”
“Overall, our refinancing objectives are to deleverage and extend maturities at a reasonable blended cost of capital,” the company said. “We are encouraged by the support and incoming interest from our existing lenders and investors and look forward to sharing more on this topic.”
