Moody’s applies B1 to Equinox facilities

Moody's Investors Service said it assigned a B1 rating to Equinox Holdings Inc.'s proposed first-lien senior secured credit facilities, comprising a $150 million revolver due 2022 and an $800 million term loan due 2024.

The agency also assigned a Caa1 rating to Equinox's proposed $200 million second-lien term loan due 2025.

Proceeds from the new term loans will be used to refinance the company's existing first- and second-lien debt of the same size.

The proposed transactions are a credit positive as they extend maturities of the company's debt while lowering interest expense.

Equinox's B2 corporate family rating is unaffected by the proposed transaction.

Moody’s said the refinancing will result in interest cost savings of approximately $8 million annually. As a result of these actions, free cash will increase by a like amount and EBITA to interest will improve slightly from the LTM September 2016 level of about 1.1 times.

“The B2 corporate family rating reflects the company's high leverage and modest interest coverage, as well as the highly competitive nature of the fitness industry,” the agency said in a news release.

“The ratings also consider Equinox's strong market position among upscale fitness clubs, and good operating trends such as steadily growing club and membership counts.”

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