Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Luxury gym chain Equinox has raised $1.8bn from a group of private capital investors to refinance $1.2bn in debt maturing on Friday, winning it financial breathing room after the pandemic pummelled its business.
Sixth Street, one of the largest private lenders globally, and existing investor US private equity group Silver Lake, are leading the group. They would pump in $1.8bn in debt to refinance maturing loans and fund working capital and the growth of new clubs, Equinox said in a press release on Friday.
The refinancing would be done in two tranches of loans and does not include any preferred equity, or other debts that can be converted into equity and dilute Equinox’s existing equity owners, according to two people familiar with the matter.
Equinox, which is owned by the founders of real estate group Related Companies, faced a liquidity crunch as a result of the 2020 pandemic when it was forced to close gym chains for many months and saw its membership decline. Since then, its financial health has improved, but rising interest rates and its high debt level limited its options to refinance the loans, amplifying fears it would face a liquidity crunch.
Earlier this week, rating agencies S&P Global and Moody’s put Equinox on watch for downgrades deeper into junk territory, fearing that it could face a restructuring if it were unable to refinance the loans.
S&P noted in a March 5 note that the company had just $44mn left of cash on hand and it expected Equinox “to be unable to generate sufficient cash flow over the next year to cover fixed charges” if it were to refinance its debts at prevailing rates.
But a consortium of private capital groups and some of Equinox’s existing investors averted the crunch by arranging the refinancing.
The investor group also includes private credit groups Ares Management and HPS, and L Catterton, a private equity group that invested in Equinox in 2017. Executives of Related are also investing in the deal.
Equinox said the refinancing had come as its financial picture is recovering. Its revenues increased 27 per cent last year and the group is building 25 new clubs, expanding its footprint by about 20 per cent.
“We are seeing record performance in revenue growth and member engagement, which demonstrates our position as the global leader in high-performance luxury lifestyle,” said Harvey Spevak, executive chair of Equinox.
Read the full article here
