(Bloomberg) -- Budget gym company Planet Fitness is boosting its debt load to buy more gyms, in a bet that consumers will keep returning to health clubs as the pandemic shows signs of easing. 

The company plans next week to sell $975 million of bonds backed by almost all its U.S. assets that generate revenue, including franchise payments and corporate-owned locations. By effectively mortgaging its business, it can sell investment-grade notes instead of a junk debt. 

These bonds are known as whole-business securitizations, and investors are clamoring for them as they look for securities with relatively high yields during a time of high inflation. Companies ranging from fast food restaurants to housecleaners have sold these kinds of notes recently, which helped bring total sales of asset-backed securities last year to a post-crisis record. 

Read more: From Fried Food to Gym Fees, It’s All Securitized in Yield Grab

It’s not clear how much Planet Fitness’s securities will yield, but similarly rated five-year securities from Self Esteem Brands, owner of the Anytime Fitness chain of 24-hour gyms, were sold at yields around 5% in November. Yields on corporate bonds maturing in three to five years averaged about 1.66% at the time, according to Bloomberg index data.     

For Planet Fitness, as much as $325 million of the money it raises will help pay for more than 100 gyms that it’s buying for $800 million by taking over its oldest franchisee, Sunshine Fitness Growth Holdings. The rest of the bonds it sells will refinance debt. The company has sold whole-business securitizations at least three times since 2018, and the one scheduled for next week is its biggest ever. 

Sunshine is one of the “best-performing franchisees in our system,” said Chris Rondeau, CEO of Planet Fitness, in a presentation last week. Once the deal closes, Planet Fitness will own 10% of the gyms under its brand, with the rest continuing to be operated as franchises.

Guggenheim Securities is arranging the deal. Kroll Bond Rating Agency has given the issuance a preliminary BBB credit rating, the second-lowest investment-grade rating, while S&P assigned it a BBB- rating, one step lower. The notes will be sold in three parts, the biggest of which have average lives of 4.7 years and 9.4 years. 

Back to the Gym?

Like most gym providers, Planet Fitness suffered during the early stages of the pandemic as people worked out at home. The company saw system-wide sales fall by $835 million in 2020 from the year before. Many other fitness companies had it worse, with Gold’s Gym International Inc.; Town Sports International LLC, owner of New York Sports Clubs; 24 Hour Fitness Worldwide Inc. and In-Shape Health Clubs all filing for bankruptcy in 2020. 

Now Planet Fitness’s revenue is regaining lost ground. For the 12 months ended Sept. 30, 2021, sales were about $3.25 billion. That compares with $3.13 billion for the 12 months ended Sept. 30, 2019, according to a Jan. 19 report from Kroll led by analyst Xilun Chen. 

New Covid-19 variants, such as the most recent omicron, could weigh on results. For gyms broadly in the U.S., visits dropped by 11.9% in the week of Dec. 27 from the same week in 2019, according to data from Placer.ai, an analytics firm that tracks retail foot traffic. The drop was more significant the following two weeks, with attendance down by roughly 20% during the first week of January and 15.5% during the second, compared with 2019. 

Still, Kroll’s report points out that Planet Fitness is well positioned in the market thanks to its low fees. The fitness firm charges just $10 a month, Chen said in a phone interview. 

“They are targeting a customer base that does not go to the gym very often, so the universe may be much larger,” Chen said.

The fitness chain said it added 1.7 million net new members in 2021. The flip side of Planet Fitness’s growing membership may be fewer people buying home gym equipment. 

Peloton Interactive Inc.’s shares dropped 24% Thursday after a report that it’s temporarily suspending production of its bikes and treadmills, and the company released preliminary results for the quarter ended Dec. 31 that were weaker than analysts had expected on average. 

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