Equities

Peloton Secures $850M JPMorgan Loan, Cuts Workforce by 15%

Peloton seeks $850 million loan with JPMorgan to refinance debt, amid restructuring and market challenges.

By Mackenzie Crow

5/15, 17:46 EDT
Citigroup, Inc.
JP Morgan Chase & Co.
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Key Takeaway

  • Peloton is securing an $850 million loan led by JPMorgan to refinance debt, indicating a proactive financial management strategy.
  • Amid post-pandemic sales challenges, Peloton announces restructuring, including a 15% workforce reduction and CEO departure.
  • Explored financing options with Citigroup and private lenders before JPMorgan deal, highlighting efforts to sustain operations.

Peloton's New Financing Strategy

Peloton Interactive Inc. is in the process of securing approximately $850 million through a new loan sale, with JPMorgan Chase & Co. spearheading the initiative. This move aims to refinance the company's existing debt, showcasing Peloton's proactive approach to managing its financial obligations. The syndication for this term loan is set to officially launch on Monday, indicating a swift action plan by Peloton and its financial partners. The terms proposed for this new loan include a margin of 6.5 percentage points over the Secured Overnight Financing Rate, although these conditions are subject to adjustments based on investor feedback and market conditions.

Market Response and Strategy

Peloton, once celebrated as a pandemic success story, has faced challenges in maintaining its sales momentum in the post-pandemic era. The company's decision to refinance its debt comes at a critical juncture, following the announcement of a significant restructuring effort. This restructuring includes a 15% reduction in Peloton's global workforce and the stepping down of Chief Executive Officer Barry McCarthy. These moves are part of Peloton's broader strategy to stabilize its operations and financial health in a changing market landscape.

Exploring Financing Options

Prior to engaging JPMorgan for the $850 million loan sale, Peloton was in discussions with Citigroup Inc. and various private credit lenders for new financing solutions. These discussions revolved around securing a loan of at least $750 million to address Peloton's $1 billion in convertible notes. The exploration of different financing avenues underscores Peloton's commitment to finding a sustainable path forward, despite the challenges it faces. It is noteworthy that Peloton clarified Citigroup was not representing the company in those earlier discussions, highlighting the dynamic nature of its financial strategy development.

Management Quotes

  • A representative for Peloton:

    "The company is making progress on its refinancing strategy in close collaboration with its lead banks and financial advisor and continues to be encouraged by the support and inbound interest we’ve received."