Peloton's stock price declines following announcement of refinancing to avoid financial strain.

• Peloton has initiated a "global refinancing" to repurchase its debt and prolong its loan repayment terms.
• In a private offering, the fitness company is providing $275 million in convertible senior notes.
• Peloton is facing slowing sales and a deeply red business, which has led to the need for refinancing.

On Monday, shares of the connected fitness company plummeted after it announced a "global refinancing" to address a cash crunch caused by declining sales.

The company is planning to issue $275 million in convertible senior notes due 2029 and enter into a $1 billion five-year term loan and $100 million revolving credit facility.

Peloton intends to utilize the earnings to repurchase approximately $800 million of its 0% convertible senior notes, which are maturing in 2026, and refinance its current term loan.

After Peloton announced refinancing, shares fell more than 12% in extended trading, but later regained some ground.

Peloton CEO Barry McCarthy resigned last month and the company announced it would lay off 15% of its workforce due to not being able to align its spending with revenue.

Peloton has been striving to improve its cash position as demand for its connected fitness products declines. Achieving positive free cash flow makes the company a more attractive borrower and is crucial as it focuses on refinancing its debt, McCarthy stated in a memo to staff before his departure.

In a letter to shareholders, the company stated that it is "aware" of the timing of its debt maturities, which include convertible notes and a term loan. It is collaborating with its lenders at JPMorgan and Goldman Sachs on a "restructuring plan."

"Our refinancing objectives aim to reduce debt and lengthen maturities while maintaining a reasonable cost of capital, the company stated. We are optimistic about the backing and interest we have received from our existing lenders and investors and are eager to provide more information on this subject."