Oak Hill Is Said to Be Among Lenders in Deal Aiding Equinox

(Bloomberg) -- Oak Hill Advisors and Ares Management Corp. provided the bulk of a new $150 million loan to Equinox Holdings Inc. to help the luxury gym operator weather the crippling effects of the Covid-19 pandemic.

Oak Hill provided about $50 million of the loan that was also pitched to a small group of investors, according to people familiar with the matter. Bank of America Corp. led the financing, the people said.

The company, led by Executive Chairman Harvey Spevak, sought the new debt last month as it burned through cash while its fitness clubs remained closed because of the virus. Equinox has furloughed thousands of employees in regions where it’s forced to keep locations shut, some with no immediate guidelines for reopening in the wake of a surge in new cases, Bloomberg News reported earlier this month.

Representatives for Oak Hill and Ares declined to comment, as did representatives for New York City-based Equinox and Bank of America.

Equinox, also the majority owner of SoulCycle Inc., has furloughed about 3,000 staffers as the pandemic took a particularly hard toll on gyms. 24 Hour Fitness Worldwide Inc. and Gold’s Gym International Inc. have both sought court protection from creditors in recent months after shuttering locations.

Equinox’s new loan priced at 97 cents on the dollar, and will pay a premium of 900 basis points above the London interbank offered rate, according to one of the people. The debt ranks pari-passu, or on an equal footing, with its existing first-lien facility, and matures in 2024, according to a June 11 report from S&P Global Ratings.

Equinox’s first-lien loan was trading at around 77 cents on the dollar on Monday.

Equinox’s cash balance “may be less than adequate to cover the anticipated cash burn over the next few months,” S&P wrote in May.

The new loan would cover a few additional months of cash burn, S&P said in the June report, noting at the time that despite re-openings in Vancouver, Texas and Florida, the majority of clubs on the east and west coasts of the U.S. remain closed. Even if all clubs reopen in the third quarter, Equinox may continue to burn cash for several subsequent months as it brings employees back from furloughs and pays vendors, it said.

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