Peloton Loan: Citigroup Sounds Out Private Credit Firms

(CTN News) – Citigroup Inc. and private credit providers have been discussing the possibility of providing Peloton Interactive Inc. with fresh capital to potentially refinance the company’s debt, people familiar with the matter told Reuters.

According to the people, who asked not to be named because the matter is private, there are proposals under discussion regarding a loan of at least $750 million, which could be used to pay off a portion, or even all, of the fitness technology company’s convertible notes.

It is also possible that the new capital would be used to refinance the company’s existing term loan, according to one of the people we spoke with.

They added that the talks between the bank and the private credit lenders are informal, and there is still a possibility that a deal will not be reached.

There was a spokesperson for Peloton who said the bank wasn’t representing the company, while a Citigroup representative declined to comment on the matter.

The demand for risky debt is on the rise and a surge in the number of borrowers tapping private Peloton credit markets and leveraged finance for cash. In recent months, Wall Street banks and direct lenders have been competing fiercely to win deals, causing some recent private loans to have record-low spreads.

You may want to read more: Moody’s says private credit returns will be pressured by banks in the future

As a result of a post-pandemic slump, Peloton has had trouble recovering, and its shares have fallen amid growing expectations that further sales declines will be recorded in the near future.

As a result of a surge in sales of zero-coupon deals, the company has a $1 billion convertible bond that it sold early in 2021 amid a surge in sales of zero-coupon bonds. Despite providing cheap capital at the time when the securities were issued, they may also have made it more urgent to refinance the debt at that time.

According to a regulatory filing, Peloton’s existing loan would become due immediately if more than $200 million of the securities remain outstanding by November 2025, according to the filing.

As the company’s stock is currently trading at less than $5 per share, a conversion to equity would be unlikely unless the stock price reaches around $239 per share, which is where the company’s stock is currently trading.

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