Research Update: Fitness International LLC Liquidity Revised To Adequate Following Preferred Equity Issuance; Ratings Unchanged

Irvine, Calif.-based fitness club operator Fitness International LLC (doing business as LA Fitness) issued $525 million of preferred equity in April 2020. The company used the proceeds to pay down a portion of its Main Street Expanded Loan Facility (MSELF) and used the rest to bolster cash balances. Therefore, we revised Fitness International LLC's liquidity assessment to adequate from less than adequate. Our 'CCC+' issuer credit rating on the company is unchanged and reflects the company's very high leverage, which we expect will be above 7x in 2021, possibly recovering to the 6x area in 2022. The negative outlook reflects our expectation for a slow recovery in membership, revenue, and EBITDA throughout the year, resulting in very high leverage and

...- Irvine, Calif.-based fitness club operator Fitness International LLC (doing business as LA Fitness) issued $525 million of preferred equity in April 2020. The company used the proceeds to pay down a portion of its Main Street Expanded Loan Facility (MSELF) and used the rest to bolster cash balances. - Therefore, we revised Fitness International LLC's liquidity assessment to adequate from less than adequate. - Our '###+' issuer credit rating on the company is unchanged and reflects the company's very high leverage, which we expect will be above 7x in 2021, possibly recovering to the 6x area in 2022. - The negative outlook reflects our expectation for a slow recovery in membership, revenue, and EBITDA throughout the year, resulting in very high leverage and negative free cash flow in 2021. We could lower the ratings if we believed the company's liquidity position could deteriorate and that the company could default or restructure debt in the next 12 months....

Research Update