S&P pares PureGym

S&P said it downgraded Pinnacle Bidco plc (PureGym) to CCC+ from B-, the rating on its £95 million super senior revolving credit facility to B from B+ and the rating on the £430 million of bonds, due 2025 to CCC+ from B-.

The recovery ratings remain 1 and 4, respectively. At the same time, S&P removed all of the ratings on the company from CreditWatch, where it placed them with negative implications on April 8.

“The downgrade reflects the uncertain macroeconomic environment that PureGym faces over the next 12 months, and the risk that a prolonged downturn could leave it burdened with an unsustainable capital structure,” S&P said in a press release.

The effects of the pandemic along with the £380 million debt-financed acquisition of Fitness World completed in January will spike the group’s leverage to 18x in 2020 and cause it to remain above 8x in 2021, compared with 6.5x in 2019, S&P said.

“The data from reopened sites in Denmark and Switzerland indicate that more than 90% of closing members have retained their membership. However, the U.K. sites – which represent about 60% of PureGym’s revenue – have not opened yet, and the trends from these sites will provide a better sense of the group’s free operating cash flow (FOCF) generation into the second half of 2020 and beginning of 2021,” S&P said.

The outlook is developing.

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