Grubhub is facing such a huge debt problem recently. Its owner, Wonder, is requesting lenders, approaching them, as well as private credit firms, to seek around $500 million to refinance the existing debt of the food delivery company, sources close to Ridesharing Forum stated.
Wonder is seeking to include a payment-in-kind feature in the new debt refinancing, which would allow the company to defer at lease a portion of its interesting payments until the concluding maturity of the debt, the sources, who asked to be anonymous, added.
Wonder is a company which operates delivery-focused food halls. It has acquired Grubhub in the late 2024 to build a “super app for mealtime”.
The company wishes this interesting rate with potential investors: around 13 percent. This is inclusive of the PIK component, the sources revealed. Private credit lenders usually offer PIK structures to fast-growing technology companies with predictable revenue streams, but need to burn through cash to obtain new customers or develop new products.
No comments
Interestingly enough, there are no comments from Wonder and Grubhub. In the past, private credit lenders have considered financing proposals for Grubhub, but this deal was never completed, the sources also revealed.
Furthermore, Grubhub has $500 million of notes outstanding, issued in 2019 with the assistance of investment banks at a coupon of 5.5 percent, Bloomberg data revealed.
This is in line with the food delivery industry facing pressure, particularly in New York City. This is after the city placed a cap on fees that meal delivery companies charge restaurants. Those affected are Grubhub, DoorDash, and Uber, which recently agreed to settle a lawsuit over the caps in exchange for changes to the law the city will submit by the end of this year.
What is debt refinancing?
Debt refinancing is the process of replacing an existing loan with a new one, often with better terms. People and businesses choose to refinance to take advantage of lower interest rates, reduce monthly payments, or change the loan duration.
For example, if you have a loan with a high interest rate and market rates drop, refinancing can help you lock in a lower rate. This can save you thousands over the life of the loan. It’s a common strategy with mortgages, car loans, and business debts.
Another reason to refinance is to extend the repayment period. Doing so may lower your monthly payments, which can ease cash flow. However, stretching out the loan means you may pay more in total interest.
Refinancing can also consolidate multiple debts into one. This is especially useful for managing credit card debt, where interest rates are typically high. A single, lower-interest loan can simplify payments and reduce overall interest costs.
But refinancing isn’t always a good idea. It can come with fees, closing costs, or penalties for paying off your original loan early. It also requires a credit check, and poor credit might mean you won’t qualify for better terms.
Timing matters too. Refinancing during a high-interest period may not save you money. It’s important to evaluate both current rates and your long-term financial goals prior to making a decision.
In short, debt refinancing can be a powerful financial tool when used wisely. Whether you want to cut costs, simplify payments, or change loan terms, it’s worth considering – especially during periods of lower interest rates. Just make sure to read the fine print and crunch the numbers before you commit.