| Item 1.01 | Entry into a Material Definitive Agreement |
Convertible Notes and the Indenture
As part of its previously announced global refinancing, on May 21, 2024, Peloton Interactive, Inc. (the “Company”) priced its private offering of $300.0 million aggregate principal amount of 5.50% Convertible Senior Notes due 2029 (the “Notes”). Pursuant to the purchase agreement between the Company and J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC (the “Initial Purchasers”), the Company also granted the Initial Purchasers a 13-day option to purchase up to an additional $50.0 million aggregate principal amount of the Notes, which option was exercised in full on May 22, 2024. The Notes were sold only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).
The net proceeds from this offering were approximately $343.0 million, after deducting the Initial Purchasers’ discounts and commissions. The Company used the net proceeds from the offering to repurchase approximately $350.0 million aggregate principal amount of its 0.00% convertible senior notes due 2026 and to pay fees and expenses related thereto.
The Notes were issued pursuant to an Indenture, dated May 24, 2024 (the “Indenture”), between the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Indenture includes customary covenants and sets forth customary events of default.
The Notes will mature on December 1, 2029, unless earlier converted, redeemed, or repurchased. The Notes will bear interest at a rate of 5.50% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024. The Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding September 1, 2029, only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on September 30, 2024, if the last reported sale price of the Company’s Class A common stock, par value $0.000025 per share (the “Class A Common Stock”) exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business day period after any ten consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Class A Common Stock and the conversion rate on each such trading day; (3) upon the occurrence of specified corporate events or distributions on the Class A Common Stock; and (4) if the Company calls such Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date. On or after September 1, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the Company may satisfy its conversion obligation by paying and/or delivering, as the case may be, cash, shares of the Class A Common Stock or a combination of cash and shares of the Class A Common Stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. The conversion rate for the Notes will initially be 218.4360 shares of the Class A Common Stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $4.58 per share of the Class A Common Stock. The initial conversion price of the Notes represents a premium of approximately 40% to the $3.27 per share last reported sale price of the Class A Common Stock on May 21, 2024. The conversion rate is subject to customary adjustments under certain circumstances in accordance with the terms of the Indenture. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture and which includes the sending of a notice of redemption) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.
