HRFITW 8 06/01/22

24 Hour Fitness USA Inc

Credit, Consumer


Please note, 24 Hour Fitness USA Inc changed the symbol of its bond to HRFITW from HOUFIT. The text of the note below may still refer to the original symbol.

Publicly traded companies mentioned herein: 24 Hour Fitness Worldwide Inc (private co w/ public debt), Planet Fitness Inc (PLNT), Town Sports International Holdings Inc (CLUB)

Highlights

The presenter is long 24 Hour Fitness’ 8% June 1, 2022 bonds and believes the senior unsecured debentures represent a good value in the low 80s at a ~12% YTW (AEA, 24 Hour’s sponsor, put in nearly $600mm and paid 7.5x in 2014, versus 5x). He likes CEO Mark Smith and thinks his experience at Town Sports and Goodlife (in Canada) is important to the success of 24 Hour because he has a solid track record of growing clubs (from 100 to >300 locations) and this is an execution story. The bonds were originally issued at par and the reasons the opportunity exist include: fear of competition (namely, Planet Fitness) and a bad 4Q pre-announcement in December 2014 that caused the bonds to sell-off by 20 points. However, the mid-tier gym segment of the market has been stable and 24 Hour is making smart operational changes that should lead to better performance.

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Idea Discussion

Commentor 1 - 2 weeks ago

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