Moody’s Investors Service affirmed the debt ratings of PureGym following the London-based budget fitness chain refinancing. Moody’s said the refinancing removed debt maturity risks and marginally improved PureGym’s debt leverage.

The rating agency estimated PureGym’s gross leverage, measured as Moody’s-adjusted gross debt/EBITDA, improved to an estimated 6.2x pro forma for the transaction, from 6.4x for the last twelve months (LTM) to June 30, 2023.

Moody’s said in a press release, “Moody’s expects PureGym’s leverage and coverage metrics to improve over the next 12-18 months from earnings growth, driven by maturation of recently opened sites, continued recovery in member base at mature clubs, strict cost control, and energy prices hedged at favourable rates until year end 2024.

“An improvement in gross leverage to around 5.3x by year end 2024 is credit positive, although interest cover, measured as Moody’s-adjusted EBITA/interest ratio will remain weak, despite the rating agency forecasting an improvement to 1.0x from 0.7x on a LTM basis, pro-rata for the refinancing. In addition, cash consumption will remain substantial, albeit to a lower extent than recently, as PureGym continues to invest in growth capital spending and will contend with higher interest costs. We forecast free cash flow to be negative by around GBP55 million in 2024 compared with around minus GBP90 million in 2022.”

The ratings reaffirmed include PureGym’s B3 corporate family rating (CFR), B3 backed senior secured rating, Ba3 senior secured bank credit facility rating and B3-PD probability of default rating (PDR) of Pinnacle Bidco plc’s (PureGym or the company), a leading budget gym operator. The outlook remains stable.