S&P snips Equinox

S&P said it trimmed its issuer rating for Equinox Holdings Inc. to CCC- from CCC and its other ratings by a notch.

“The downgrade reflects the risk that the company may be unable to refinance its first-lien revolver at par prior to its maturity in March 2023. Additionally, we believe that even if the company successfully extends the maturity of its revolving credit facility, it is still burning significant amounts of cash. That means it would likely require additional equity support beyond the $135 million its owners contributed in the first three quarters of 2022 to maintain a reduced level of cash burn and avoid a liquidity crisis,” the agency said in a press release.

Though Equinox has recovered members and produced positive EBITDA in the third quarter, S&P warned the company’s debt balances are unsustainable in the long term. Equinox has $1.4 billion of debt due in 2024.

“Because of these sizeable maturities, weak liquidity and negative cash flow generation, we believe the risk of a distressed exchange or other transaction we would view as tantamount to a default is very high in the near term,” the agency said.

The outlook is negative.

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