Is Peloton defaulting on Second Amended and Restated Credit Agreement?

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minorityreportc
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Joined: Mon Mar 20, 2023 6:57 pm

Is Peloton defaulting on Second Amended and Restated Credit Agreement?

Post by minorityreportc »

TL;DR:

Peloton is projected to have $2.8 bil revenue in 4 consecutive quarter ending 2023-03-31, below minimum $3 bil revenue requirement for meeting Second Amended and Restated Credit Agreement Financial Covenant, resulting in default. Is my calculation and understanding correct?


Peloton has Second Amended and Restated Credit Agreement Financial Covenant which require minimum $3 billion revenue over 4 consecutive quarters
(Sec 6.10 (b) (ii))[https://www.sec.gov/Archives/edgar/data ... dmente.htm]

Above criteria applies because it has not met critieria for Conversion Date (Adjusted EBITDA over 2 consecutive quarters have not been greater than $0 since Second Amendment Effective Date 2021-12-10)

Quarterly total revenue ending on date from 10-Q:
2022-12-31 $792.7 mil
2022-09-30 $616.5 mil
2022-06-30 $678.7 mil

Projected 2023-03-31 $690 to $715mil (according to company projection from WSJ)
[https://www.wsj.com/articles/peloton-pt ... 1675255113]

Assuming projection is fairly accurate and using upper projection, total 4 quarter revenue ending 2023-03-31 would be approx. $2.8 bil, below $3 bil Financial Covenant requirement.

Did I make calculation mistake or wrong understanding? Assuming accuracy, according to Second Amended Agreement, Peloton will be in default.

Note for 2022-06-30 quarterly revenue calculation, I used 2022-06-30 yearly revenue (10-K) and subtracted 2022-03-31, 2021-12-31, 2021-09-30 quarterly revenue ($3582.1 - $964.3 - $1133.9 - $805.2 = $678.7 mil)

Conversion Date is described on p12 of Second Amended agreement.
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