Shares of the related health operator fell on a brand new debt providing.
Shares of Peloton Interactive (PTON -16.37%) have been taking a dive at present after the high-end maker of train bikes introduced a world refinancing that might embody borrowing at an rate of interest above 11%.
Because of this, the inventory completed the day down 16.4%.
Picture supply: Peloton.
Peloton wants assist
Just some weeks in the past, Peloton reported one other disappointing earnings report, full with a decline in income and one other large loss.
On Monday after hours, the corporate introduced plans for a world refinancing, which incorporates $275 million of convertible senior notes due in 2029, a $1 billion five-year time period mortgage facility, and a $100 million five-year revolving credit score facility.
The corporate plans to make use of the proceeds to repurchase $800 million of convertible notes due in 2026, and to refinance its current time period mortgage and revolving credit score amenities.
It is unclear what rate of interest Peloton must pay, nevertheless it could possibly be as excessive as 11.5%, in line with Bloomberg. The transfer is the newest signal that Peloton could possibly be in actual monetary bother, as the corporate was additionally stated to be in search of a buyout from non-public fairness companies, although the corporate didn’t verify that.
Can Peloton survive?
It has been a tough few years for Peloton because the pandemic’s peak, and it is nonetheless unclear if the corporate can discover a sustainable enterprise mannequin.
Peloton has succeeded in narrowing its money stream losses, nevertheless it nonetheless has work to do to get to profitability. Extra troublingly, its stability sheet is weak, because it has $3 billion in liabilities and $2.4 billion in property, that means it could not afford to repay its debt if it wanted to.
An 11% rate of interest on a $1 billion mortgage might make it even more durable for the corporate to remain afloat and switch worthwhile. Whereas Peloton’s monetary issues aren’t dire simply but, with out a restoration within the enterprise and optimistic free money stream, chapter is an actual chance down the highway.
Jeremy Bowman has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Peloton Interactive. The Motley Idiot has a disclosure coverage.
