The RealReal Just Traded High-Interest Debt for a Lower Rate, and Wall Street Rewarded It With an 11% Pop

The RealReal announced a new $150 million senior secured term loan and a $25 million senior secured revolving credit facility on Thursday, both maturing in October 2033 and managed by affiliates of Fortress Investment Group. The new debt carries 5.75% interest, well below the 4.25%/8.75% PIK/cash-pay rate on the senior secured notes due 2029 that the proceeds will retire. The deal is expected to close October 19.

Investors liked what they saw: shares of the luxury resale marketplace jumped roughly 11.5% the day of the announcement, pushing its market value to about $1.2 billion. The company currently carries just over $463 million in debt against $119 million in cash, and the refinancing is expected to cut total debt to around $150 million, a reduction of more than two-thirds. None of that debt was due imminently, which suggests The RealReal is acting now to lock in a lower rate before borrowing costs climb further, rather than reacting to a looming deadline.

The company's CFO said The RealReal has now cut total debt by more than $80 million over two years, part of a broader push toward profitability. The RealReal has posted a GAAP loss every year it has been public, but its free cash flow turned positive in 2024 and has grown steadily since, a trend analysts expect to continue.

Source: Retail Dive

Kyle Duford, Founder & Editor, BRNDWIRE. More from Kyle →