Luxury gym chain Equinox has raised $1.8 billion from a group of private capital investors to refinance $1.2 billion in debt amassed in the wake of the COVID-19 pandemic.
As reported by the Financial Times, citing a press released issued Friday, Sixth Street, one of the largest private lenders globally, and private equity group Silver Lake, an existing investor, are leading the the effort to infuse $1.8 billion toward the refinancing of maturing loans and to fund working capital and the growth of new clubs.
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.
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, Antoine Gara and Eric Platt of the Financial Times reported.
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 gyms 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, Gara and Platt reported.
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 March 5 that the company had just $44 million left of cash on hand and that 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.
Equinox says its revenues increased 27 per cent last year, and 25 new clubs will expland the brand's footprint by about 20 percent.
“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, as reported by the Financial Times.
