Equinox affirmed at CCC by S&P Global Ratings after revolver refinancing

High-end fitness club operator Equinox Holdings Inc. was affirmed at CCC and a negative outlook today by S&P Global Ratings, with the agency citing the company's successful refinancing of its $150 million revolving credit facility with a new revolver and term loan. Ratings assigned a CCC rating to a new, fully drawn $76 million revolver due March 2023 and to a new $73.9 million first-lien term loan due March 2024.

S&P Global Ratings said all the company's clubs are now fully open, but membership rolls at the end of 2021's third quarter are off roughly 30% from year-end 2019 and down less than 1% from the end of 2021's second quarter. Ratings believes there is "significant uncertainty around the timing and shape of the company's revenue and membership recovery," especially with the appearance of the new omicron COVID-19 variant.

Ratings said that unless Equinox can "enhance its liquidity or materially slow its cash burn," it could face a liquidity crunch within the upcoming year. The rating agency noted that Equinox has received "substantial support" from its corporate parent, Equinox Group LLC, along with lease deferrals and abatements. Equinox reported about $157 million in unpaid rent at Sept. 30, according to Ratings.

Ratings assessed Equinox's liquidity as "weak" because of "material" negative operating cash flow and a deficit in liquidity sources over the next year.