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S&P upgrades over $1.1B in Planet Fitness whole-biz notes

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S&P Global Ratings upgraded the 2018 series notes issued by Planet Fitness’ whole-business securitization trust, after noting the fitness-center chain’s “strong growth” in net cash flow collections to aid de-leveraging efforts.

S&P upgraded the estimated $1.19 billion in outstanding Class A-1, A-2-I and A-2-II notes to BBB from its original BBB- rating. The notes had been placed on watch for a possible upgrade in mid-November when the company issued $550 million in a new 2019 notes offering through the Planet Fitness Master Issuer trust.

The upgrade came as the ratings agency also finalized the preliminary BBB ratings on the Hampton, N.H.-based chain’s recent offering. Kroll Bond Rating Agency also issued final BBB ratings on the 2019 series on Tuesday, as well as confirming the BBB rating for the 2018 notes Kroll had assigned when the original $1.27 billion deal priced in July 2018.

S&P noted the notes’ long-term, 30-year legal final maturity of the 2018 series “allows sufficient time for the assets to generate enough cash flow to support the expected 6.50x total debt/adjust EBITDA post-issuance leverage level.”

Other upgrade factors include Planet Fitness (NYSE: PLNT) recently expanding international footprint into Australia, as well as continuing to grow its brand recognition supported by a $42 million ad fund paid by franchise-fee royalties.

The 2019 issuance raised proceeds to further international expansion, as well as pay a dividend to equity shareholders in the company.

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Whole business securitization