A pedestrian walks past a Peloton store in Palo Alto, California, on May 8, 2024.
Justin Sullivan | Getty Images
Shares of Peloton fell on Monday after the connected fitness company said it would launch a “global refinancing,” as it looks to avoid a cash crunch amid declining sales.
The company is offering $275 million of convertible senior notes due 2029 in a private offering and plans to enter into a five-year, $1 billion term loan and a $100 million revolving credit facility.
Peloton plans to use the proceeds to repurchase approximately $800 million of its 0% convertible senior notes, which currently mature in 2026, and refinance its existing loan.
Shares fell more than 12% in extended trading after Peloton announced the refinancing, but later regained some of its gains.
Last month, Peloton announced that CEO Barry McCarthy would step down and said it planned to lay off 15% of its workforce because it “simply has no other way to bring its spending in line with its revenue.”
The restructuring is designed to improve Peloton's cash position as demand for its connected fitness products continues to decline. The company is working toward positive free cash flow, which “makes Peloton a more attractive borrower” and “is important as the company turns its attention to the necessary task of successfully refinancing its debt,” McCarthy said in a memo to employees beforehand. Until his departure.
In a letter to shareholders, the company said it was “aware” of the timing of maturity of its debt, which includes convertible notes and a term loan. It said it was working closely with its lenders at JP Morgan and Goldman Sachs on a “refinancing strategy.”
“In general, our refinancing objectives are to reduce debt and extend maturities at a reasonable blended cost of capital,” the company said. “We are encouraged by the support and interest from our existing lenders and investors and look forward to sharing more on this topic.”
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