OVERVIEW
- Planet Fitness Master Issuer LLC's (Planet's) series 2019-1 note issuance is backed by a security interest in substantially all of the assets of the issuer and guarantors.
- We assigned our 'BBB (sf)' rating to the series 2019-1 class A-2 notes.
- In addition, we raised our ratings on Planet's series 2018-1 notes to 'BBB (sf)' and removed them from CreditWatch; the upgrade reflects the strong growth in securitized net cash flow collections since the series 2018-1 closing date.
- The assigned rating reflects our view of the transaction's structure, as well as Planet's highly franchised business model and growing brand recognition, among other factors.
NEW YORK (S&P Global Ratings) Dec. 3, 2019--S&P Global Ratings today assigned its 'BBB (sf)' rating to Planet Fitness Master Issuer LLC's (Planet's) series 2019-1 asset-backed notes. At the same time, we raised the ratings on the series 2018-1 class A-1, A-2-I, and A-2-II to 'BBB (sf)' from 'BBB- (sf)' and removed them from CreditWatch, where they were placed on Nov. 13, 2019, with positive implications. The note issuance is an ABS transaction backed by a security interest in substantially all of the assets of the issuer and guarantors. The assigned new issue rating and rating actions on the existing notes reflect:
- The transaction's structure, which segregates substantially all of Planet's existing and future revenue-generating assets into the securitization issuer's asset-owning entities and minimizes the likelihood of cash flow disruption in the event of the bankruptcy filing of the manager, Planet;
- Planet's highly franchised business model (96% franchised), of which we believe its core streamlined selling, general, and administration functions could be transitioned to a replacement manager in the event of Planet's bankruptcy;
- The backup manager's ability to maintain cash flow continuity in the event of a manager bankruptcy;
- The 30-year legal final maturity, which allows sufficient time for the assets to generate enough cash flow to support the expected 6.50x total debt/adjusted EBITDA post-issuance leverage level;
- Planet's growing brand recognition, supported by its $42 million annual national advertising fund, which is funded by franchisees in the U.S. and Canada (using 2% royalties) as well as corporate stores;
- Planet's system size, which allows economies of scale in equipment purchases and network benefits for its Black Card members;
- Planet's 27 years of operating history (including 16 years as a franchised brand); and
- A modest cash flow cushion observed in cash flow stress scenarios.
The rating actions on series 2018-1 reflect all of the factors listed above, as well as the strong growth in total securitized net cash flow collections since the series 2018-1 closing date.
RELATED CRITERIA
- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation And Special-Purpose Entity Criteria, May 15, 2019
- Criteria | Structured Finance | ABS: Global Methodology And Assumptions For Corporate Securitizations, June 22, 2017
- General Criteria: Principles For Rating Debt Issues Based On Imputed Promises, Dec. 19, 2014
- Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
RELATED RESEARCH
- Presale: Planet Fitness Master Issuer LLC (Series 2019-1), Nov. 13, 2019
- Credit FAQ: The Key Ingredients For Whole Business Securitization Ratings, Feb. 22, 2019
- Restaurant Securitizations Are Structured To Survive A Big Bite, Sept. 7, 2017
- Why Social Media Should Be A #trendingtopic In Corporate Securitization Analysis, June 9, 2017
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
In addition to the criteria specific to this type of security (listed above),
the following criteria articles, which are generally applicable to all
ratings, may have affected this rating action: "Counterparty Risk Framework:
Methodology And Assumptions," March 8, 2019; "Post-Default Ratings
Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?,"
March 23, 2015; "Global Framework For Assessing Operational Risk In Structured
Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments:
Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "
Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012;
"Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch
And Outlooks," Sept. 14, 2009.
RATING ASSIGNED
Planet Fitness Master Issuer LLC (Series 2019-1)
Class Rating(i) Amount (mil. $)
A-2 BBB (sf) 550.00
RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE
Planet Fitness Master Issuer LLC (Series 2018-1)
Ratings
Class To(i) From
A-1 BBB (sf) BBB- (sf)/Watch Pos
A-2-I BBB (sf) BBB- (sf)/Watch Pos
A-2-II BBB (sf) BBB- (sf)/Watch Pos
(i)The ratings do not address post-ARD contingent interest. ARD--Anticipated
repayment date.
| Primary Credit Analyst: | Jesse R Sable, CFA, New York (1) 212-438-6719; jesse.sable@spglobal.com |
| Secondary Contacts: | Elizabeth T Fitzpatrick, New York (1) 212-438-2686; elizabeth.fitzpatrick@spglobal.com |
| Jie Liang, CFA, New York (1) 212-438-8654; jie.liang@spglobal.com | |
| Matthew R Howard, Chicago + 1 (312) 233 7035; Matthew.Howard@spglobal.com |
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