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
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.)
