Moody's adds LD to 24 Hour Fitness

Moody's Investors Service said it appended a limited default (LD) designation to All Day AcquisitionCo LLC's (24 Hour Fitness) Caa3-PD probability of default rating thereby changing it to Caa3-PD/LD.

This LD designation reflects a limited default in 24 Hour Fitness's capital structure with regards to the recent amendment to extend the maturity of its unrated $60 million super priority term loan. The company completed a credit agreement amendment to extend the maturity of its $60 million super priority term loan ($62.5 million outstanding including accrued PIK interest as of Sept. 30, 2021) from August 2022 to September 2025. The amendment also allowed the company to extend the filing period for its FY2021 audited financials to Dec. 31, 2022.

“Moody's views the amendment to extend the maturity as a distressed exchange default (DE) because of 24 Hour Fitness's weak liquidity, high leverage, and significant cash flow pressure as a result of weak operating performance since the company exited chapter 11 bankruptcy reorganization in December 2021. The PDR will revert to Caa3-PD and the LD designation will be removed in approximately three business days,” the agency said in a press release.

The extension does not change the company's Caa3 corporate family rating, the Caa3 ratings on the company's senior secured term loan due 2025 and senior secured delayed-draw term loan due 2026, or the negative outlook because leverage is not changing and remains high, operating performance remains weak, and free cash flow is negative, Moody’s said.

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