Equinox Lenders Organize, Tap Akin Gump for Debt Talks
(Bloomberg) -- Lenders to high-end gym chain Equinox Holdings Inc. have organized and hired a law firm to help protect their holdings as the company seeks to shore up its finances amid the pandemic.
Investors holding close to a majority of Equinox’s roughly $1 billion loan brought in legal advisers from Akin Gump Strauss Hauer & Feld and are in the process of adding more lenders to the group, according to people with knowledge of the situation. Talks are in the early stages and the group hasn’t engaged with the company in an official capacity, said the people, who asked not to be identified discussing a private matter.
Equinox didn’t immediately respond to requests for comment, while Akin Gump declined to comment.
The New York-based gym operator is facing a February 2021 deadline to repurchase certain debt tied to its SoulCycle spin studio chain. It’s also been hampered by lockdowns and social distancing measures that place limits on visitors and operating hours at certain locations. SoulCycle has been allowed to resume operations in some cities and is conducting outdoor classes elsewhere.
In May, Equinox received an amendment allowing it to delay repurchasing some of SoulCycle’s debt until next year, according to S&P Global Ratings. Equinox had guaranteed the SoulCycle borrowings in a deal that normally required it to buy back the obligations when the spin studios’ debt relative to earnings exceeded certain thresholds. HPS Investment Partners is the SoulCycle lender and provided the forbearance, the people said.
A representative for HPS declined to comment. Equinox pledged certain international assets as a component of the amendment, according to S&P.
S&P said it viewed the amendment as tantamount to default. In February, Equinox will have to buy back enough debt to reduce SoulCycle’s debt relative to earnings to below five times, the credit grader said in a June report.
Equinox has been burning cash and is expected to have elevated debt relative to earnings after it was forced to close locations to help stem the spread of Covid-19, S&P said. In June, the gym chain took on a new $150 million loan that ranks equal with its $1 billion obligation in line for repayment.
The entire fitness industry is reeling from forced closures tied to the pandemic. Chains including Gold’s Gym International Inc., 24 Hour Fitness Worldwide Inc. and New York Sports Clubs owner Town Sports International Holdings Inc. have sought bankruptcy protection in recent months, while LA Fitness International LLC is weighing options including a capital raise to ease its financial pressures and keep operating, Bloomberg previously reported.
New York and New Jersey have allowed fitness centers to reopen at limited capacity, with masks required for customers and staff.
Equinox’s $1.02 billion loan due 2024 last traded around 78 cents on the dollar, according to Bloomberg data.
Equinox, which started as a single fitness club in New York’s Upper West Side, has grown to operate more than 100 gyms globally, according to its website. It has locations in cities including Los Angeles, Miami and San Francisco and also operates brands including Blink Fitness, Precision Run and Pure Yoga.
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