November 6, 2012 / 4:00 PM / 5 years ago

TEXT-S&P: Town Sports ratings unaffected by special dividend

Nov 6 - Standard & Poor's Ratings Services said today that all of its
ratings on Town Sports International Holdings Inc. (TSI, B+/Stable/--),
are unaffected by the company's announcement of a one-time dividend of up to $92
million. We expect the dividend to be funded in part through cash on hand, and
through $75 million in incremental borrowings under TSI's senior secured term

The incremental debt will absorb most of the cushion TSI currently has with 
respect to our operating lease-adjusted leverage threshold of 6x for the 'B+' 
rating. However, given our current operating forecast for TSI, incorporating 
relatively stable levels of attrition and modest growth in new members driven 
by planned new club openings, we believe TSI can maintain leverage below our 
threshold over the intermediate term. Furthermore, the excess cash flow sweep 
provision under TSI's credit facility should create some cushion relative to 
our 6x threshold to facilitate continued investment in new club openings over 
the intermediate term. At Sept. 30, 2012, pro forma for the incremental debt, 
adjusted leverage and coverage were 5.5x and 2.1x, respectively.

     -- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
     -- Standard & Poor's Revises Its Approach To Rating Speculative-Grade 
Credits, May 13, 2008
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
     -- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
     -- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008
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