Peloton refinances debt as financial challenges persist - The Entrepreneurial Way with A.I.


Thursday, May 23, 2024

Peloton refinances debt as financial challenges persist


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Dive Brief:

  • Peloton announced a global refinancing on Monday, aimed at restructuring its existing term loan and revolving credit facilities. The fitness retailer also plans to issue new convertible notes in order to pay off a portion of debt maturing in 2026, according to the press release. 
  • The company announced the sale of $300 million of convertible notes due in 2029 in a private offering and said it would grant the buyers a 13-day option to purchase up to an additional $50 million. Peloton will use the net proceeds to repurchase at least $800 million of its senior notes due in 2026.
  • The new notes will have an interest rate of 5.5%, payable semi-annually in arrears, and the deal is expected to close on Friday. Peloton will also enter into a $1 billion five-year term loan along with a $100 million five-year revolving credit facility, which are dependent on Peloton’s repurchase of its old senior notes.

Dive Insight:

Peloton is raising funds to reduce debt as the brand reportedly fields interest from potential private equity buyers, reshuffles its corporate executive team and undergoes layoffs.

Earlier this month, Peloton’s CEO Barry McCarthy stepped down as chief executive, president and board director. On the same day, the company announced a restructuring plan that includes laying off 15% of its global workforce, with an overall goal of reducing expenses by more than $200 million by the end of the 2025 fiscal year. The company said a significant portion of the cuts are to take effect immediately.

Peloton has been trying to right the ship for years, though. The company was riding high during the height of the pandemic when most people were confined to exercising from home. When COVID-19 restrictions were lifted in 2021, Peloton’s fortunes only got worse and haven’t recovered.

When McCarthy took over as Peloton’s chief executive officer in February 2022, the company announced on the same day that it was laying off about 20% of its corporate positions, impacting some 2,800 jobs globally.

Eight months later, Peloton announced it would reduce its workforce by about 12%, or approximately 500 jobs, as part of a turnaround strategy. McCarthy said at the time that the company lost more than $100 million on retail in 2021 and that the restructuring was necessary to reach break-even cash flow by the end of the fiscal year.

The new restructuring plan announced earlier this month is intended to save the company roughly $200 million. About half is to come from payroll-related expenditures. The other $100 million will come from lower marketing spend, a reduced retail footprint, as well as less spending on contractors, IT and software. The brand is also reevaluating its international strategy to be more “targeted and efficient,” according to the company.

Peloton’s executive team is also in transition. Over the last several months, the company named new key players. Lauren Weinberg became chief marketing officer in January after Leslie Berland resigned less than a year into the position.

Last November, Peloton co-founder and chief product officer Tom Cortese stepped down and was replaced by technology industry veteran Nick Caldwell. In September, Peloton named C├ędric Fletcher senior vice president of apparel and accessories, just a few months after the company announced a brand relaunch.

With restructuring underway, Peloton is also looking to replace former CEO McCarthy, who took over from co-founder John Foley two years ago. Karen Boone, Peloton’s current chairperson, and Chris Bruzzo, a company director, are serving as co-CEOs until a permanent successor is found.


Suzette Parmley, Khareem Sudlow