Moody’s trims Town Sports

Moody's Investors Service said it downgraded Town Sports International, LLC's corporate family rating to Caa2 from B3 and probability of default rating to Caa2-PD from B3-PD.

Concurrently, Moody’s downgraded the speculative grade liquidity rating to SGL-4 from SGL-2 and lowered the senior secured bank credit facilities to Caa1 from B2.

“The downgrades reflect that Town Sports has been unable to refinance its $178 million term loan which expires Nov. 15, 2020. It also reflects the acceleration in the pace of Town Sports' earnings declines with a 35% decline in EBITDA during Q3 2019 to $7.8 million from $12 million in the prior year. For the nine months ended September 30, 2019, EBITDA declined 23% to $30.6 million from $39.8 million in the prior year. Given the revenue and EBITDA pressures it could be challenging for Town Sports to refinance its term loan on reasonable economic terms despite its moderate level of financial leverage. Should Town Sports be unable to refinance its term loan, the company does not have the cash on hand or other sources of available liquidity to satisfy this obligation.

The outlook is negative.

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