S&P rate new Equinox notes B-

Standard & Poor's said it assigned its B corporate credit rating to fitness club operator Equinox Holdings Inc. and its B- rating to the company's proposed $150 million senior unsecured notes due 2009.

The outlook is stable.

S&P said the ratings reflect Equinox's geographic concentration, relatively small scale, aggressive financial profile, debt-financed expansion plans, and the increasingly competitive fitness market. These considerations are partly offset by the company's strong New York City club cluster, good same-club revenue and membership growth, and better margins than industry peers.

S&P said relatively weak credit statistics of the company are mainly due to the company's aggressive debt-financed growth.

Pro forma liquidity is provided by $43.7 million in cash and marketable securities and by its undrawn $25 million revolving credit facility due 2008.

S&P said it expects the company to have discretionary cash flow deficits for the medium term due to significant capital projects as the company completes its club clusters in Chicago and Los Angeles. A slower-than-expected ramp up at new clubs could negatively affect liquidity.

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