S&P puts Equinox on negative watch

Standard & Poor's said it placed its ratings on Equinox Holdings Inc. on CreditWatch with negative implications, including the B corporate credit rating and B- senior unsecured debt rating.

The rating action follows the company's announcement that it has agreed to be acquired by The Related Cos. LP for about $505 million in cash. As part of Related's proposed financing for the transaction, a Related entity will begin a cash tender offer to buy Equinox's outstanding 9% senior notes due 2009.

The CreditWatch listing is based on concerns that the transaction could increase Equinox's debt leverage and heighten financial risks, the agency said. The company has been performing well with steady membership and revenue growth. However, Equinox is also rapidly expanding its fitness club base, with six new clubs planned for 2006, and this has kept its debt burden high.

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