Peloton has increased their senior secured bond offering to $700 million and set an annual interest rate of 8.625%, with the notes due in 2032.
The company announced the pricing on November 10, one day after launching the refinancing we covered earlier this week. The offering is $100 million larger than the original $600 million proposal.
Peloton expects the sale to close on November 20, subject to customary closing conditions. Gross proceeds would be approximately $700 million before the initial purchasers’ discounts and commissions and other offering expenses.
Interest will be paid twice a year. The 8.625% rate would mean about $60.4 million in annual interest on the new bonds while the full $700 million remains outstanding. That calculation covers the bonds’ stated interest payments, rather than all of Peloton’s financing costs.
Peloton plans to combine the net proceeds with cash they already have to repay their remaining term loan and cover related fees and expenses. The existing loan facility would then be terminated.
Although the release refers to a $1 billion term loan facility, that is the original facility size. Peloton’s latest quarterly filing says the remaining balance was $697.5 million after a $280 million payment on October 9.
The new bonds would replace a loan due in May 2029 with debt due in 2032.
The same quarterly filing reported a 10.5% effective interest rate on the term loan as of September 30. That effective rate includes the loan’s discount and issuance costs spread over its life. The new bonds’ 8.625% stated interest rate does not include the bonds’ own discounts, commissions and offering expenses, so the two figures alone do not establish exact savings.
The broader plan still includes a proposed $200 million revolving credit facility lasting five years. This would give Peloton access to borrowing capacity; it does not mean they are automatically borrowing another $200 million.
Peloton’s November 10 SEC filing also says neither establishing the new revolver nor repaying the existing loan is a condition of closing the bond sale.
Any remaining net proceeds may go toward general corporate purposes, which could include share repurchases, capital spending, working capital or acquisitions.
For the original $600 million proposal, SGB Media’s ratings coverage reports that S&P Global Ratings assigned Peloton a “BB-” company credit rating and a “BB” rating to the proposed notes and revolving facility. Moody’s assigned a “Ba3” rating to the proposed notes. Both agencies gave stable outlooks.
High-yield, or “junk,” bonds have ratings below investment grade. Both agencies cited Peloton’s cash flow as a strength, while highlighting continued subscriber losses and the risks of restoring growth.
We’ll share any other updates as they come up.
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