Peloton shares drop after it announces refinancing to stave off cash crunch
Is Peloton Spinning Out of Control?
Peloton announced a "global refinancing" strategy, including offering $275 million in convertible notes and establishing a $1 billion term loan to manage its debt and extend loan maturities. This move comes as the company faces declining sales and financial challenges, prompting a restructuring that includes layoffs and leadership changes. Shares dropped over 12% following the announcement but later recovered slightly.
What specific financial actions is Peloton taking as part of its "global refinancing" strategy?
As part of its "global refinancing" strategy, Peloton is taking the following specific financial actions:
- Offering $275 million in convertible senior notes due 2029 in a private offering.
- Entering into a $1 billion five-year term loan facility and a $100 million revolving credit facility1.
- Using the proceeds to repurchase approximately $800 million of its 0% convertible senior notes due 2026, refinance its existing term loan and revolving credit facilities, and pay fees and expenses related to the refinancing12.
These actions aim to deleverage and extend maturities at a reasonable blended cost of capital, allowing the company to address its cash flow and debt management challenges.
What are the terms and the total amount of the new debt facilities Peloton plans to enter into, including the term loan and revolving credit facility?
Peloton plans to enter into a $1 billion five-year term loan facility and a $100 million five-year revolving credit facility as part of its global refinancing strategy. The company is also offering $275 million in convertible senior notes due 2029 in a private offering.