Herbalife’s newly returned chief financial officer took little time to initiate fundraising initiatives after his appointment late last month. Over the past few weeks, the downtown-based health supplement producer introduced a senior secured notes offering and debt-refinancing plan in an attempt to stabilize its finances after a dramatic stock plunge that has taken place in the last six months.
John DeSimone replaced Alex Amezquita as chief financial officer on March 20, and two days later the company initiated a refinancing process for a billion-dollar loan from 2018 that matures next year.
The company aimed for $1.2 billion in secured refinancing and a $400 million revolving credit facility to pay off this Term Loan B and contribute to the ongoing refinancing of another Term Loan A and previous $330 million senior revolving credit facility due next year.
“We are pleased that this transaction will allow us to remain focused on positioning Herbalife for continued growth and returning value to our shareholders,” DeSimone said.
Herbalife earlier this month offered, then upsized, a senior secured notes sale up to $800 million aggregated principal amount that matures in 2029. According to the announcement, proceeds will go towards the senior secured credit facility, and a portion of senior notes due next year.
These initiatives follow what boomerang chief executive Michael Johnson outlined as a priority right behind “sales, sales, sales, sales.” The company aims for an extended cash runaway to address outstanding debt, all while addressing several headwinds undercutting sale margins.
Last year, worldwide sales fell to $5.06 billion from $5.2 billion in 2022, a slide from the company’s peak sales of $5.8 billion reached in 2021. Herbalife cited higher input costs due to inflation and distributor shortages as explanations for its slowed revenue, despite having introduced more than a dozen new products last year.
Herbalife reported in its end-of-year Securities and Exchange Commission filings that it had more than 2 million distributors in the U.S., Mexico and India and approximately 200,000 sales representatives in China.
For comparison, in its sales heyday two years ago, the company reported over 2.3 million across the same three countries and 300,000 sales reps in China.
Herbalife has mapped out an “aggressive” plan to increase distributor recruitment and retention, as well as an internal restructuring of the company.
Johnson was named interim chief executive two years ago, but a regulatory filing in January shows the executive agreed to stay on through this year. In February he bought nearly $500,000 worth of Herbalife shares, bringing his total equity stake to 15%.
It’s no surprise Johnson tapped DeSimone for the chief financial officer role once again. The duo had worked as top managers for almost seven years, during which time the company’s gross profit peaked at $3.86 billion in 2013, and survived a short-selling bet by Bill Ackman, who claimed the company was nothing more than a pyramid scheme.
After Herbalife’s earnings report in February sunk its stock to a 14-year low, Ackman took to his 1.2 million followers on X, formerly known as Twitter, to claim victory over the company.
