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Weight Watchers lenders organize as Ozempic threatens performance
Rachel Butt
+Larry Feldman
•2 min read
A group of lenders to WW International, operator of the well-known Weight Watchers franchise, has hired Gibson Dunn to prepare for debt talks with the struggling diet company, according to 9fin sources.
The organization comes as WW is battling subscriber losses amidst the advent of weight loss drugs such as Ozempic and Wegovy.
Investors are also rattled by Oprah Winfrey’s plan to step down from WW’s board in May, after the entertainment mogul revealed that she’s using a weight loss medication. Winfrey is also planning to donate her holdings in the company’s stock to the National Museum of African American History and Culture.
WW shares are currently trading at $2.61 for a market cap of roughly $207m. The company's 4.5% notes due 2029 have traded down more than 20 points on the year and last changed hands at 43.1875 today, compared with the first trades in January, according to Trace data. Its term loan due 2028 is indicated at 50, also down 20 points over that time span, according to 9fin data.
During a Q4 23 earnings call held 28 February, WW management said it is looking to improve the company’s leverage ratio while also opportunistically considering capital structure options.
WW’s net leverage reached roughly 9x as of 31 December 2023, based on $146.4m in LTM adjusted EBITDAS. The company could only borrow another $61.25m on its revolver as it’s in breach of a first lien leverage ratio, leaving it reliant on its $109.4m of cash balance.
Should management continue to manage costs well, WW is positioned to generate cash even if growth is low, sources said. The company could also monetize its licensing agreements to get more breathing room, sources said.
For the fourth quarter ended 31 December, WW saw its net loss widen to $88.1m, from a loss of $35.8m in the same period a year ago. Its liquidity at the end of the period consisted of $109.4m in cash and $173.8m available on an undrawn revolver.
The company ended Q4 with 3.8m subscribers, down from 4m in the prior quarter.
Representatives at WW and Gibson Dunn didn’t respond to requests for comment.
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