The debt ratings of Town Sports International, the parent of New York Sports Club and Boston Sports Club, were lowered by S&P because the U.S.-based fitness club operator failed to pay outstanding revolver balances when due August 14.
S&P said the failure to make its revolver payment gives its lenders the option to accelerate the payment of outstanding balances under its much larger term loan, and the company is seeking a forbearance agreement with its lenders regarding the term loan acceleration option. S&P Global Ratings is currently not aware of lenders sending a notice of acceleration on the term loan yet, and is also not aware of the company missing a term loan interest payment. As a result, for purposes of these ratings actions, we assume the company is current on the term loan.
S&P said it is lowering its issuer credit rating on Town Sports to ‘SD'(selective default) from ‘CC’. The rating on the company’s senior secured term loan remains ‘CC’.
S&P said, “The company is seeking a forbearance agreement from its lenders regarding accelerating the term loan, and if received and the company otherwise remains current on the term loan, the rating on the term loan would likely remain ‘CC’, at least until it matures in November 2020. If the company does not achieve a forbearance agreement and the term loan maturity is accelerated, or the company otherwise fails to remain current on the term loan, we would lower its issue-level rating to ‘D’. We could also lower the rating on the term loan to ‘D’ if the company fails to meet the original terms of its commitment under this debt as part of a larger restructuring effort.”
Photo courtesy Town Sports International
