Fitness International’s Debt Lowered Despite Government Help

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On November 16, 2020, S&P Global Ratings lowered its issue-level ratings on Fitness International LLC's (LA Fitness) senior secured revolving credit facility, term loan A and term loan B to CCC+ from B-. The Company's $300 million Main Street Loan follows standard terms for the U.S. Federal Reserve's Main Street lending program, including amortization of 15% in years three and four of the loan and a final bullet payment of 70% at maturity in year five, according to the ratings agency. Concurrent with the Company's issuance of the Main Street loan, the Company also raised $30 million of equity from its ownership. While S&P Global views the incremental liquidity provided by these transactions as a credit positive, it believes that leverage is likely to remain elevated at potentially unsustainable levels through 2021 even under a scenario for dissemination of a COVID-19 vaccine by mid-2021 because the Company will need time to start to rebuild its reduced membership base, revenue and EBITDA in a manner that can enable it to possibly begin to reduce leverage.

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