(Bloomberg) — Peloton Interactive Inc., the fitness company known for its pricey exercise bikes and treadmills, has started selling a $1 billion loan as it works to refinance existing debt and recover from a recent sales decline, according to a news release. someone who is familiar with the subject.
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Early pricing discussions call for the loan to have an interest rate of 600 basis points above the Secured Overnight Financing Rate and a discount of 98 to 98.5 cents on the dollar, said the person, who asked not to be identified discussing private details. That pricing would equate to a return of approximately 11.5%.
The proceeds will be used to refinance a term loan due 2027 and to repurchase a number of convertible bonds due 2026.
JPMorgan Chase & Co is leading the transaction, with a lender closing scheduled for Tuesday at 1 p.m. New York time. The commitments are due on Wednesday, just one day after the lender’s call.
Peloton is the latest issuer in a wave of companies taking advantage of the strong credit market. Citrix Systems Inc.’s parent company, Staples Inc. and Gray Television Inc., also recently began refinancing efforts.
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Peloton said Monday that its refinancing plans also include selling $275 million of senior convertible notes due 2029 and entering into a new $100 million revolving credit facility.
The loan is unrated and is being marketed to a wide range of investors, including direct lenders, private lenders and loan investors who have the option to buy debt not rated by rating agencies, according to another person with knowledge of the matter . The loan also includes a rare structure where the company must pay a penalty if the debt is refinanced early, similar to a junk bond deal.
The convertible bond could be sold as early as Tuesday, the person added.
“We continue to work closely with our lead banks and our financial advisor on our refinancing strategy and are encouraged by the support and inbound interest we have received,” a Peloton spokesperson said in an emailed statement.
JPMorgan declined to comment.
Peloton was a high-flyer during the early days of the pandemic, as lockdowns sent consumers scrambling for their go-to gym equipment and fitness classes. But as people returned to gyms, paying subscribers dropped, leaving the company with a surplus of inventory.
Earlier this month, Chief Executive Officer Barry McCarthy announced plans to resign amid a restructuring that will reduce the fitness company’s global workforce by 15%.
Peloton shares have lost about 97% of their value since the start of 2021. The stock fell as much as 5.4% to $3.70 in aftermarket trading Monday after the company announced its refinancing plans.
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