Peloton shares fall after announcing refinancing to avoid financial difficulties

A pedestrian walks in front of a Peloton store on May 8, 2024 in Palo Alto, California.

Justin Sullivan | Getty Images

peloton Stocks plunged on Monday after the connected fitness company announced it would launch a “global refinancing” to avoid a cash crunch While sales are decreasing.

The company is offering a private placement of $275 million in convertible notes due in 2029, and expects to enter into a $1 billion five-year term loan and a $100 million revolving credit facility.

Peloton plans to use the proceeds to buy back about $800 million of its 0% convertible notes, which currently mature in 2026, and refinance its existing term loan.

Shares fell more than 12% in after-hours trading after Peloton announced the refinancing, but have since rebounded somewhat.

Peloton announced last month that CEO Barry McCarthy would step down and lay off 15% of its workforce because “there was no other way to align spending with revenue.”

This reorganization was designed to: Improving Peloton’s cash flow As demand for the company’s connected fitness products continues to decline. The company is committed to achieving positive free cash flow, which “makes Peloton a more attractive borrower” and “is important as the company focuses on the necessary task of successfully refinancing its debt.” ” McCarthy said in a memo to staff in advance. Until his departure.

In a letter to shareholders, the company said it is “mindful” of the timing of debt maturities, including convertible notes and term loans. The company said it is working closely with lenders JPMorgan and Goldman Sachs on a “refinance strategy.”

“Overall, our refinancing objective is to deleverage and extend maturities at a reasonable overall 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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