Fitness International LLC

About 20% of the company's fitness clubs are closed as a result of state government-mandated closures, with approximately 25% of its membership base at those locations. We believe that while these frozen-status members are not being billed, cancellations are suppressed. When these clubs reopen and billings resume, it could trigger another round of member cancellations. As a result, we believe LA Fitness' leverage will be very high this year, and that free cash flow will remain negative through 2021 and could be minimal to slightly positive in 2022. The circumstances for membership freezes is largely different, and the duration is likely longer. Members on hold as a result of the pandemic have had significant time to begin changing their fitness

...Our '###+' rating reflects our forecast for very high leverage and weak EBITDA coverage of interest through 2021. Under our base-case forecast for revenue and EBITDA, we believe Fitness International LLC (d/b/a LA Fitness) will maintain high leverage and generate negative free cash flow in 2021. It is also our understanding that at the end of 2020, LA Fitness' systemwide membership was approximately 20% below its pre-pandemic peak membership base. Approximately 35% of its base are currently nonpaying and on-hold members. About 20% of the company's fitness clubs are closed as a result of state government-mandated closures, with approximately 25% of its membership base at those locations. We believe that while these frozen-status members are not being billed, cancellations are suppressed. When these clubs reopen and billings resume, it could trigger another round of member cancellations. As a result, we believe LA Fitness' leverage will be very high this year, and that free cash flow will...

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