S&P cuts 24 Hour Fitness outlook to negative

Standard & Poor's said it revised its outlook on 24 Hour Fitness Worldwide Inc. to negative from stable while ratings on the company, including the B corporate credit rating, were affirmed.

"The outlook revision reflects its concern that the recession will cause comparable club revenue to continue to decline and aggravate an unfavorable mix between prepaid and monthly memberships," explained credit analyst Tulip Lim.

"In particular, the agency said it believes these trends could have repercussions for 24 Hour Fitness' liquidity amid tightening financial covenants."

The B rating reflects 24 Hour Fitness' aggressive growth strategy, its high financial risk, narrowing margin of compliance with financial covenants, and competitive pressures in the fitness club industry, the agency said.

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