Peloton is launching a “global refinancing” initiative aimed at restructuring its financial obligations (i.e. refinancing its current debts). This will consist of a sale of convertible senior notes, a new loan, and a new credit. In total, this would give Peloton access to nearly $1.4 billion across all of the new initiatives.
This is $1 billion from the loan, $275 million from sale of notes, a $100 million credit facility, and an extra $41 million for option of notes.
The press statements & press releases all mention how “refinance its existing term loan and revolving credit facilities and to pay fees and expenses” is a primary driver of their new offerings:
Peloton intends to use the net proceeds of the offering of the notes and the new credit facilities, together with cash on hand, to repurchase approximately $800.0 million of its 0.00% convertible senior notes due 2026 (the “Existing Notes”), to refinance its existing term loan and revolving credit facilities and to pay fees and expenses related thereto. The closing of the offering, the entry into the new credit facilities and the repurchase of the Existing Notes are not cross-conditioned upon each other, except the entry into the new credit facilities is conditioned upon the repurchase of at least $800.0 million aggregate principal amount of the Existing Notes.
This will mostly refinance debts that would have been due in 2026 & 2027.
We first shared that this was in the works following a report last week.
Peloton’s stock (PTON) dropped nearly 10% in after-hours trading as news of this new initiative was first released. After the markets first opened Tuesday, the stock was down over 12%.
Bloomberg is reporting that JP Morgan Chase (who is leading the fundraising effort for Peloton) will hold a call about the loans at 1pm on Tuesday – and are expecting all commitments of people who wish to participate to be due Wednesday – the next day.
Their report shed a little more light on the loan details – including that it may include a penalty if the new debt is refinanced early:
The loan is unrated and is being marketed to a broad range of investors, including direct lenders, private credit providers and loan investors that have the ability to buy debt not graded by rating firms, according to a different person with knowledge of the matter. The loan also includes a rare structure that would require the company to pay a penalty if the debt is refinanced early, similar to a junk-bond deal.
Reuters went on to report that while the exact interest rate has not been determined, Peloton would be making those interest payments semi-annually.
This move is part of Peloton’s ongoing efforts to stabilize its finances and improve liquidity amidst a challenging amount of existing debt, like the $1 billion they raised in 2021. The refinancing plan involves securing new credit facilities and extending the maturities of existing debt to provide more financial flexibility.
Peloton’s new interim CEOs – Karen Boone and Chris Bruzzo – recently spoke about the status of Peloton’s upcoming debt on the latest earnings call. This week’s announcement is their effort to manage that debt.
The company detailed the amount they hoped to raise in a release, saying:
Peloton Interactive, Inc. (“Peloton”) (Nasdaq: PTON) today announced that it intends to launch a global refinancing, pursuant to which it will offer $275.0 million aggregate principal amount of convertible senior notes due 2029 (the “notes”) in a private offering (the “offering”) and enter into a $1.0 billion five-year term loan facility (the “new term loan facility”) and a $100.0 million five-year revolving credit facility (together with the new term loan facility, the “new credit facilities”). Peloton also expects to grant the initial purchasers of the notes a 13-day option to purchase up to an additional $41.3 million aggregate principal amount of the notes.
All of this comes as part of Peloton’s latest restructuring efforts – which saw Barry McCarthy leave as CEO, and Peloton laying off nearly 400 employees in a goal to save $200 million annually.
You can read the full details via the Peloton press release.
Peloton also filed a new 8-K form with the Securities Exchange Commission (SEC) to accompany the announcement.
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