Where does Peloton go now after staving off the cash crunch that threatened its business?

• By November 2025, Peloton faced hundreds of millions in loan payments that threatened to push the company into bankruptcy unless it refinanced.
• With the successful refinancing of its debt, the connected fitness company now has the financial flexibility to revitalize its business and enhance investor and lender confidence.
• Despite no longer facing an immediate financial crisis, Peloton must address its strategic flaws.

The company no longer faces an imminent liquidity crunch after a massive debt refinancing, but it still has a long road ahead to fix its business and achieve profitability.

In May, the fitness company secured a $1 billion term loan, raised $350 million in convertible senior notes, and received a $100 million line of credit from JP Morgan and Goldman Sachs, all of which are due in 2029.

Peloton's debt was reduced from approximately $1.75 billion to $1.55 billion through refinancing, which also delayed payment deadlines on loans that the company may not have had the funds to repay.

Peloton would have needed to pay approximately $1 million toward its debt every month from November 2025 to May 2027 if it had not refinanced its debt.

Since Peloton hasn't made a net profit since December 2020 and has experienced declining sales for nine consecutive quarters, the company's debt pile posed an existential threat and caused investors to worry about the possibility of bankruptcy.

Peloton has alleviated investor worries about liquidity and now has the flexibility to attempt to revive its business.

Experts told CNBC that the company's ability to secure loans indicates that investors believe it can downsize its business and eventually repay them, signaling confidence in its financial future.

"Peloton's finance chief, Liz Coddington, stated in an interview with CNBC that the refinancing has improved the company's financial position and made it more sustainable for profitable growth. Investors saw this and are confident in the company's future, as are Peloton's executives."

Peloton faces risks ahead

Although the refinance may have given Peloton some breathing room, it is not a cure-all. With the new terms, Peloton will now be paying approximately $133 million annually in interest, an increase from the previous $89 million. This will make it harder for Peloton to maintain positive free cash flow.

Coddington admitted to CNBC that the increase in interest expenses will negatively affect free cash flow, but he explained that this is one of the reasons why the company initiated cost-cutting measures in May. The company aims to reduce its annual run-rate expenses by more than $200 million through this plan.

Despite the higher interest payments, Coddington anticipates that the company will maintain positive free cash flow without experiencing significant growth in the near future.

"That made us much more comfortable with the cost reduction plan," said Coddington.

Some investors may have bought into Peloton's refinance with the intention of benefiting if the company fails.

Peloton's largest debt holders, Soros Fund Management and Silver Point Capital, have a history of investing in distressed companies. As a result, their positions in the capital structure are near the top due to the secured nature of the Peloton loans they invested in. If Peloton's business fails to improve and it faces the possibility of bankruptcy, its creditors, including Soros Fund Management and Silver Point Capital, would be in a strong position to take control of the company.

"Evan DuFaux, a CreditSights special situations analyst and distressed debt expert, described the refinancing and recapitalization as an opportunistic move."

Neither Silver Point nor Soros responded to requests for comment.

More cost cuts to come?

Despite being in a better financial position than before, Peloton must address the ongoing demand problems that have persisted since the pandemic and determine its future business strategy.

"According to Neil Saunders, managing director of GlobalData Retail, the refinancing at Peloton is an exercise in delaying the resolution of underlying problems because it provides time but does not fix them."

With the departure of former CEO Barry McCarthy and the addition of board members Karen Boone and Chris Bruzzo, Peloton must determine whether it is a content company, similar to its fitness offerings, or a hardware company that requires new strategies to sell its expensive equipment.

So far, straddling both has proven to be unsuccessful.

According to Scott Stuart, CEO of the Turnaround Management Association and an expert in corporate restructurings, they will have to make decisions about which parts of the model are survivable, which are not, and what they can do to advance without losing their brand value, especially with their loyal following.

He stated that although money can solve some problems, the more you borrow and refinance, the more complicated the situation becomes.

Simeon Siegel, a retail analyst for BMO Capital Markets, advised Peloton to prioritize its existing customer base rather than expanding its business.

The company generates over $1.6 billion in recurring revenue with high profit margins and more than $1.1 billion in gross profit from this aspect of the business.

"The issue is that they are losing money despite generating a billion one of recurring gross profit dollars. According to Siegel, the reason for this is that they spend all of their gross profit in an attempt to acquire new growth."

If Peloton reduces its marketing budget from 25% to 10% of annual sales, it could potentially generate around $500 million in EBITDA while still remaining in the top tier of brands, according to Siegel.

""Their debt is not scary on a company that generates a tremendous amount of cash. They need to stop spending it," he said."

Peloton may be hesitant to abandon its growth strategy despite cutting 15% of its corporate workforce in May. Peloton founder John Foley aimed to reach 100 million members, and this goal was adopted by McCarthy upon taking over. As of March, Peloton had only 6.6 million members, significantly below its long-term target.

Peloton has been quiet about its strategy since the company announced its cost cutting plan, McCarthy's departure, and another disastrous earnings report in early May. The company is currently searching for a new permanent CEO, and the person they hire will provide insight into the company's direction.

If Peloton hires another "hyper growth tech CEO" like McCarthy, who had worked at Netflix and Uber, it may face the same challenges. However, if it selects someone different, it could indicate a change in strategy.

Content magic

Peloton is shifting its live programming schedule. Its New York studio currently offers live streaming classes seven days a week, but starting Wednesday, it will reduce to six. Meanwhile, its London studio moved from seven days of live streaming classes to five last month.

"Peloton's Chief Content Officer Jen Cotter stated to CNBC that despite the halt in live classes, the team will continue to create social content and develop new programs, categories, and ways to distribute wellness content."

Although she mentioned that the modification would reduce expenses for the company, it's more about utilizing the production team more efficiently than it is about cutting costs.

The company has partnered with Hyatt Hotels to generate new revenue and diversify income streams. As part of the agreement, hundreds of Hyatt properties will be outfitted with Peloton equipment, and guests will have access to bespoke Peloton classes on their hotel room TVs in around 400 locations. This schedule tweak will allow staff to be available to make content for projects like the Hyatt partnership.

Peloton trainers, including Kristin McGee, Kendall Toole, and Ross Rayburn, have decided not to renew their contracts with the company, causing concern among the company's fanbase about the high turnover of trainers.

The door is open for the athletes to return, as Cotter insisted that the parting was amicable.

Cotter stated that all the instructors were offered contracts and they decided to leave. Despite this, the instructors were highly respected and appreciated for their contributions. If they wanted to explore new opportunities, that was understandable.

"We are like a professional sports team, and while we will miss our members, we understand that athletes sometimes leave the team. We hope this change will help our members understand that it's okay for people to try new things and that we will still love them, even if they are no longer with us."

When Peloton was renewing its trainer contracts, McGee, Toole, and Rayburn all departed.

Some instructors may be teaching fewer classes as part of the live content pullback. It's unclear if any instructors took pay cuts as a result, or if McGee, Toole and Rayburn left because of disagreements over compensation.

When asked, Cotter declined to answer.