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Planet Fitness taps whole-biz shelf to raise $550M in additional debt

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Planet Fitness is tapping additional debt through its whole-business securitization master trust to fund its fast-expanding fitness-center franchise.

The company announced this week is seeking an additional $550 million through the sale of fixed-rate, asset-backed notes secured by franchise revenues and fees from its Planet Fitness Master Issuer LLC trust, which last year issued its first notes totaling $1.275 billion.

The proceeds from the new notes will be used to help fund the Hampton, N.H.-based company’s rapid international expansion efforts, as well as fund a dividend to Planet Fitness (NYSE: PLNT) equity holders, according to the company and presale reports from ratings agencies.

The new notes have preliminary BBB ratings from S&P Global Ratings and Kroll Bond Rating Agency, similarly to the 2018-1 series that were launched in August 2018. The new notes will have an extended 10-year maturity, however, compared to the 2022 to 2025 expected repayment dates for the three classes of notes issued last year.

The 2019-1 Class A-2 series will be offered as the company benefits from increased system-wide store sales as well as increased store count. The company last month announced an agreement with a franchise group in Australia to open 35 new locations in that country.

“Notwithstanding that the Company operates in a highly competitive and fragmented industry with many peers, since 2014, the Company has been able grow its store count, membership count and systemwide sales by a CAGR of 17%, 19% and 23%, respectively,” according to Kroll’s presale report.

The notes offering comes days after the company announced positive third-quarter earnings and its 51st consecutive quarter of positive same-store sales. S&P noted the company has also expanded its brand recognition, supporting efforts with a $42 million annual advertising fund.

With the new notes offering, Planet Fitness will push its total debt to $1.8 billion, but is actually decreasing its leverage ratio to 6.3x from 6.6x last year with expected higher securitized net cash flow of $288 million, compared to $192 million in 2018, according to Kroll. (S&P estimates leverage at 6.5x, on the higher end of debt levels for a whole-business securitization.)

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Whole business securitization