S&P rates Equinox notes B

Standard & Poor's said it assigned a B rating with a recovery rating of 3 to Equinox Holdings Inc.'s proposed $400 million second-lien notes due 2016 and affirmed the B corporate credit rating. The agency did not assign a rating to the proposed $110 million holding company pay-in-kind notes.

The outlook is stable.

The proceeds will be used to refinance the company's existing debt.

The agency said the B corporate credit rating reflects Equinox's thin interest coverage, geographic concentration, relatively small scale, high debt leverage and aggressive club expansion plans, along with the increasingly competitive conditions in the fitness club market and various adverse effects from the recession.

The company's upscale brand franchise, strong New York club cluster and good profit margins are modest positive factors that, in S&P's view, do not offset these risks.

Pro forma for the transaction, the lease-adjusted total debt-to-EBITDA ratio is 8 times.

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