Moody's rates new Equinox notes B3

Moody's Investors Service said it has assigned a B3 rating to Equinox Holdings Inc.'s $150 million senior unsecured notes due 2009.

The outlook is stable.

Moody's said the ratings reflect the company's weak free cash flow after its significant capital expenditures, and issues related to geographic concentration. The ratings also reflect the company's record of rolling out new clubs and obtaining positive cash flow at new clubs in a relatively short time frame.

Proceeds from a $25 million senior secured revolver, not rated by Moody's, and the $150 million senior unsecured notes will be used primarily to refinance about $110 million of existing debt, to fund the company's plans to increase its club count in 2004 by one third, to 24 clubs, and for other corporate purposes. The revolving credit facility is expected to have usage of about $3.5 million in letters of credit at closing.

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