Moody's rates Equinox notes B1

Moody's Investors Service said it assigned a B1 (LGD3, 32%) rating to Equinox Holdings, Inc.'s proposed $400 million issue of senior secured notes due 2016 and affirmed the company's B3 corporate family and probability-of-default ratings.

The outlook is stable.

The proceeds from the notes, along with the proceeds from a proposed issue of HoldCo pay-in-kind notes and balance sheet cash, will be used to refinance all of the company's existing debt and pay related fees and expenses.

Moody's believes that Equinox's stable financial performance and good execution over the last year has strengthened its position within the rating level and demonstrated the resiliency of its operating model. The ratings derive support from the favorable long-term growth fundamentals for the fitness industry and the agency's expectation of improved profitability due to the maturation of clubs built by Equinox in the last few years.

However, the agency said the ratings are still constrained by the company's relatively modest interest coverage and cash flow generation, exposure to weak discretionary spending trends amidst a still very challenging macro environment, high geographic concentration and continued dependence on a limited number of clubs in the New York area for more than 50% of its revenues and profitability.

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