Peloton weighs an $800 million debut bond at about 8%, cheaper than its SOFR-plus-6% term loan

Peloton Interactive is in talks about selling its first-ever bond, a deal that could raise about $800 million, Bloomberg News reported on Wednesday, according to Reuters and Seeking Alpha. Seeking Alpha's summary of the report says Goldman Sachs set up investor meetings to test demand for a secured bond with an estimated yield of about 8%. No final decision has been made, and the deal may not happen. Peloton has not commented publicly.

Shares closed at $4.80 on Wednesday, down 4.4%, according to Nasdaq, giving the company a market value of about $2.1 billion. The report came out late in the session, so it does not explain the full day's move.

The number behind the number: what the bond would replace

The reports do not say what the money is for. Peloton's annual report for the year to June 30 shows only two pieces of debt left:

The term loan is the expensive one. The New York Fed's SOFR rate was 3.87% on September 22. Adding the 6-point spread puts the loan's cost at roughly 9.9%, or about 9.4% if the leverage step-down applies. The 10-K ties the step-down to the company's first-lien net leverage ratio but does not say whether it is in effect. The term SOFR benchmark in the loan agreement is not identical to overnight SOFR, but the two usually track each other closely. Against that, a secured bond at around 8% would be about 1.4 to 1.9 points cheaper. On $800 million, that works out to roughly $11 million to $15 million a year in lower interest. These are our estimates, not the company's.

The rate would also be fixed. The term loan floats. The Federal Reserve raised rates to 3.75%-4% last week, and Fed governor Michael Barr said on Wednesday that "further policy adjustments are likely to be needed," according to HousingWire. Every quarter-point increase adds about $2.5 million a year to the cost of a $980 million floating loan. A fixed bond would stop that. Peloton reported $123.8 million of interest expense in fiscal 2026, against $36.4 million of interest income on its cash.

Why lenders might say yes now

Peloton's financial position looks very different from two years ago. In fiscal 2026 Peloton reported net income of $63.2 million, after a $118.9 million loss the year before and a $551.9 million loss in fiscal 2024. Adjusted EBITDA was $468.2 million and free cash flow was $377.6 million. It ended June with $1.21 billion in cash against $1.33 billion of debt principal, after repaying the last $199 million of its 2026 convertible notes in February.

Revenue is still shrinking, and that is the weak point. Total revenue fell to $2.45 billion from $2.49 billion. Equipment sales fell about 6% to $770.4 million, while subscription revenue was flat at $1.68 billion. Bond buyers are lending against the subscription base, and an 8% yield, if that is where the deal prices, is the premium they would charge for that risk.

The convertible detail

The 5.5% convertible notes can be exchanged for stock at about $4.58 a share, according to the 10-K. That is 218.436 shares per $1,000 note, or about 76.5 million shares in total. Wednesday's $4.80 close is above that price. Holders can convert early only if the stock stays above 130% of the conversion price, about $5.95, for 20 of 30 trading days at the end of a quarter. The 10-K said that test had not been met.

Who it hits

For shareholders, refinancing expensive floating debt with cheaper fixed debt leaves more cash for the business. For anyone running a company on a floating-rate line, Peloton is weighing the same choice at a larger scale: pay a known fixed rate now, or keep floating while the Fed is still raising rates. We looked at what that means for smaller borrowers here.

Sources: Bloomberg News via Reuters and Seeking Alpha; Peloton Interactive Form 10-K (SEC EDGAR); Federal Reserve Bank of New York; Nasdaq. Loan cost, savings and rate-sensitivity estimates calculated by The Company Chronicle from the 10-K terms and current SOFR. This is market information, not investment advice.