After 10 years of tapping the bond market, Town Sports has come back for bank debt, according to Richard Pyle, cfo. The operator of the New York Sports Clubs chain is in the market for a $260 million credit facility to refinance bonds, according to a banker. Deutsche Bank held a bank meeting Thursday to launch syndication of the $75 million revolver and $185 million covenant-lite "B" term loan. Price talk is LIBOR plus 2 1/4%, according to Pyle. A DB banker declined comment.
The New York-based company announced last Tuesday it commenced an offer to purchase approximately $170 million of its outstanding 9 5/8% senior notes due 2011. "We had a bank facility in '96 when we did our leveraged buyout and took that out with high yield in '97," Pyle said. The company tapped the bond market because of the availability of funds and pricing. "We were at a time when we were relatively indifferent to the structure of a bond," he said. Market conditions were better in high yield at the time Town Sports issued the bonds and term loans were less flexible, he noted.
Now, the bonds are callable and the company has chosen to move into the liquid loan market. "[Bank debt] provides significant interest savings and a relative degree of flexibility," Pyle said. Town Sports did an initial public offering last year and as a result paid down part of the $255 million of senior notes. "[Bonds] were a very good source of funds for us," he said. "But now we can tap the term and loan market more easily there's always two ways you can go."
Pyle said a number of investment banks pitched a number of different capital plans ranging from bonds and loans to equity. "We went with the relationship," he said, mentioning David Crescenzi, director at DB. "We've worked with [Deutsche Bank] for over a decade." DB was also the underwriter for the bonds.
Town Sports is an owner and operator of fitness clubs in the Northeast and mid-Atlantic regions of the U.S. In addition to New York Sports Clubs, TSI operates under the brand names of Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs, and three additional clubs in Switzerland.