Herbalife holds investor meetings as refi pressure mounts
- Sasha Padbidri
- +Will Caiger-Smith
Health and wellness company Herbalife has teamed up with bankers at Citi to hold meetings with debt investors, as it takes stock of its options for addressing upcoming maturities, according to 9fin sources.
The meetings began around the time of the JP Morgan leveraged finance conference last month, and the company and its bankers have now met with a fairly large group of investors, the sources said.
The timing and structure of any potential transaction remains fluid, sources noted.
Some investors are waiting for the release of first quarter earnings to get more clarity on the company’s performance — but whatever the exact timing, a refinancing effort is expected at some point in the relatively near future given the company’s maturity profile.
Herbalife has $886.7m of gross term debt coming due in 2025, in addition to $600m of senior notes due 2025. It also has $197m of convertible senior notes due 2024. In light of the company’s recent earnings deterioration (the stock is down 42% this year to date, and pricing of Herbalife’s bonds has also fallen) some debt investors are assessing their position in the capital structure.
“Our view is that the term loan is fully covered, given the way this is positioned,” said a portfolio manager. “The company has to come up with a refinancing solution.”
Herbalife’s TLB due 2025 is quoted around 98.65. But its 4.875% unsecured notes due 2029 are currently quoted at 70.857 for a yield-to-worst of 12.734%, down several points since before the recent earnings report. That suggests a new debt financing could be costly.
The company’s stock has declined by around 31% since mid-February, after management said that sales for 2024 would be “relatively flat” during a Q4 earnings call on 14 February.
Moody’s also downgraded the company’s credit rating to B1 on 29 February, citing concerns over lower operating performance and higher leverage.
“Herbalife is now focused on reducing debt and leverage, but a financial strategy that included sizable share repurchases in prior years led to higher debt that is contributing to the elevated leverage,” Moody’s analysts said in the report.
A Herbalife representative didn’t return a request for comment. Citi declined to comment.