Debt |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt |
Debt Debt consisted of the following:
(1) See “—Term Loan Facility” below.
Senior Secured Credit Facility
In June 2015, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into a senior secured credit facility with a group of lenders led by Deutsche Bank AG as the administrative agent. On May 9, 2023, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into a tenth amendment to the credit agreement governing our senior secured credit facilities (the “Credit Agreement”). Pursuant to such tenth amendment, we refinanced our $273.6 million term loan facility that had a maturity date in December 2024 to our $310.0 million term loan facility (the “Term Loan Facility”) that has a maturity date of January 15, 2026. A portion of the net incremental cash proceeds we received under such tenth amendment was used to pay down the then existing balance on the revolving portion of our senior secured credit facilities (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”). We also converted the Credit Facilities under such tenth amendment from LIBOR to SOFR. Loans under the Term Loan Facility were issued with original issue discount of 0.50%. On December 6, 2023, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into an eleventh amendment to the Credit Agreement which reduced the interest rate under the Term Loan Facility by 0.50%. Loans under such eleventh amendment were issued at par with no original issue discount. The refinancing transactions during 2023 were accounted for as debt modifications.
Upon the exercise of an accordion feature and subject to certain conditions, borrowings under the Credit Facilities may be increased subject, in certain cases, to meeting a first lien net leverage ratio. The Credit Facilities are secured by a first priority lien (on a pari-passu basis with the Secured Notes described below) on substantially all of our assets.
Term Loan Facility
Loans under the Term Loan Facility bear interest at a floating rate per annum of, at our option, SOFR plus an applicable credit adjustment spread ranging from 0.11448% to 0.42826% depending on the duration of borrowing plus the continued applicable margin of 4.00% or a base rate plus 3.00%. The applicable margins will increase to 4.25% and 3.25%, respectively, if our public corporate family ratings falls below B2 and B from Moody’s and S&P, respectively. Before the IPO, our term loan facility had a principal balance of $850.0 million and amortized at 0.25% quarterly, which required us to make three mandatory quarterly principal repayments of approximately $2.1 million during the year ended December 31, 2021. On October 13, 2021, we used a portion of net proceeds we received in connection with the IPO to pay down $575.7 million (including a $5.7 million prepayment penalty) of our term loan facility. As a result of the pay down, we are no longer required to make quarterly principal payments on the Term Loan Facility prior to its maturity.
Revolving Credit Facility
Our Revolving Credit Facility provides for a $475.0 million revolver and matures in December 2026, except that the maturity will be October 16, 2025 if we have at least $100.0 million remaining outstanding on the Secured Notes (as defined below) on such date and January 14, 2026 if we have at least $100.0 million remaining outstanding on the Unsecured Notes (as defined below) on such date. At December 31, 2023, there were $90.0 million of outstanding borrowings on the Revolving Credit Facility and there were $32.9 million of outstanding letters of credit, resulting in total revolver availability of $352.1 million, which was available at intervals ranging from 30 to 180 days at interest rates of SOFR plus the applicable credit adjustment spread plus 3.50% or base rate plus 2.50%.
The weighted average interest rate and debt outstanding under the Revolving Credit Facility for the year ended December 31, 2023 was 8.60% and $62.6 million, respectively. The highest balance during the year was $150.0 million.
Secured Notes
On January 22, 2021, Life Time, Inc. issued senior secured notes (the “Secured Notes”) in an aggregate principal amount of $925.0 million. These notes mature in January 2026 and interest only payments are due semi-annually in arrears at 5.75%. Life Time, Inc. has the option, which began on January 15, 2023, to call the Secured Notes, in whole or in part, on one or more occasions, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to January 15, 2023, Life Time, Inc. could have redeemed up to 40.00% of the aggregate principal amount of the Secured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 105.75% of the principal amount of the Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Life Time, Inc. did not exercise this redemption right. The Secured Notes and the related guarantees are our senior secured obligations and are secured on a first-priority basis by security interests on substantially all of our assets.
Unsecured Notes
On February 5, 2021, Life Time, Inc. issued senior unsecured notes (the “Unsecured Notes”) in the original principal amount of $475.0 million. The Unsecured Notes mature in April 2026 and interest only payments are due semi-annually in arrears at 8.00%. Life Time, Inc. has the option, which began on February 1, 2023, to redeem the Unsecured Notes, in whole or in part, on one or more occasions, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to February 1, 2023, Life Time, Inc. could have redeemed up to 40.00% of the aggregate principal amount of the Unsecured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 108.00% of the principal amount of the Unsecured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Life Time, Inc. did not exercise this redemption right. The Unsecured Notes and the related guarantees are our general senior unsecured obligations and will rank equally in right of payment with all of our existing and future senior indebtedness without giving effect to collateral arrangements.
Construction Loan
On January 22, 2021, we closed on a construction loan (the “Construction Loan”) providing up to $28.0 million to partially finance the construction of a Life Time Living location. The Construction Loan has a maturity date of February 15, 2026 and is collateralized by the property. Borrowings under the Construction Loan bear interest at a variable annual rate of no less than 4.80%. Interest only payments are due monthly beginning April 15, 2022 and continuing through February 15, 2024. Beginning March 15, 2024, based on the principal balance due as of February 15, 2024, monthly principal and interest installment payments will be due in an amount sufficient to fully amortize the principal balance at maturity. At December 31, 2023 and 2022, there were $28.0 million and $21.3 million, respectively, of outstanding borrowings on the Construction Loan.
Mortgage Notes
Certain of our subsidiaries have entered into mortgage facilities with various financial institutions (collectively, the “Mortgage Notes”), which are collateralized by certain of our related real estate and buildings, including one of our corporate headquarters properties. The Mortgage Notes have varying maturity dates from February 2024 through August 2027 and carried a weighted average interest rate of 5.75% and 5.12% at December 31, 2023 and 2022, respectively. Payments of principal and interest on each of the Mortgage Notes are payable monthly on the first business day of each month. The Mortgage Notes contain customary affirmative covenants, including but not limited to, payment of property taxes, granting of lender access to inspect the properties, maintenance of the properties, providing financial statements, providing estoppel certificates and lender consent to leases. The Mortgage Notes also contain various customary negative covenants, including, but not limited to, restrictions on transferring the property, change in control of the borrower and changing the borrower’s business or principal place of business. As of December 31, 2023, we were either in compliance in all material respects with the covenants associated with the Mortgage Notes or the covenants were not applicable.
During the year ended December 31, 2023, we acquired a health club facility for a total purchase price of $15.8 million. As part of this acquisition, we paid cash of $4.0 million and assumed an existing mortgage note and related accrued interest liability of $10.6 million and $1.2 million, respectively. The mortgage note matures in June 2024, and is included in current maturities of long-term debt on our consolidated balance sheet as of December 31, 2023. The entire $15.8 million purchase price was allocated to property and equipment.
During the year ended December 31, 2022, we closed on a sale-leaseback transaction that included certain properties that served as collateral for one of the Mortgage Notes. Accordingly, we used a portion of the net cash proceeds we received from the sale-leaseback transaction to pay off in full the then outstanding principal balance of $4.6 million associated with this Mortgage Note. For more information regarding the sale-leaseback transaction, see Note 9, Leases.
Extinguishment of a Related Party Secured Loan Through the Issuance of Series A Preferred Stock
On June 24, 2020, we closed on an approximate $101.5 million secured loan (the “Related Party Secured Loan”) from an investor group that was comprised solely of our stockholders or their affiliates. During the year ended December 31, 2021, interest expense of approximately $0.7 million was recognized on this secured loan.
On January 11, 2021, Life Time Group Holdings, Inc. and certain of its subsidiaries and the investor group associated with the Related Party Secured Loan (or their assignees) entered into a contribution agreement pursuant to which we converted the total amount of outstanding principal and accrued interest (up though and including January 22, 2021) under the Related Party
Secured Loan into Series A Preferred Stock (as defined in Note 10, Stockholders’ Equity). Effective January 22, 2021, the total outstanding principal and accrued interest balance of approximately $108.6 million was conveyed by the investor group to us and we issued, on a dollar-for-dollar basis, to the investor group approximately 5.4 million shares of Series A Preferred Stock with an estimated fair value of $149.6 million. Because the fair value of the Series A Preferred Stock that was issued exceeded the carrying value of the outstanding principal and accrued interest balance associated with the Related Party Secured Loan that was extinguished, we recognized a $41.0 million debt extinguishment loss, which is included in Interest expense, net of interest income in our consolidated statement of operations for the year ended December 31, 2021. Upon the consummation of the IPO on October 12, 2021, the 5.4 million then outstanding shares of Series A Preferred Stock automatically converted into 6.7 million shares of the Company’s common stock. For more information regarding the Series A Preferred Stock that was issued in connection with this transaction, see Note 10, Stockholders’ Equity.
Debt Discounts and Issuance Costs
Unamortized debt discounts and issuance costs associated with the Term Loan Facility, Secured Notes, Unsecured Notes and Construction Loan of $15.3 million and $19.2 million are included in Long-term debt, net of current portion on our consolidated balance sheets at December 31, 2023 and 2022, respectively.
Unamortized revolver-related debt issuance costs of $2.3 million and $3.1 million are included in Other assets on our consolidated balance sheets at December 31, 2023 and 2022, respectively.
During the year ended December 31, 2021, in connection with the pay down of our Term Loan Facility, as well as the extinguishment of a prior term loan facility, certain secured and unsecured notes and a related party secured loan, we recognized $28.6 million of debt discount and issuance cost write-offs, which are included in Interest expense, net of interest income in our consolidated statement of operations.
Debt Covenants
We are required to comply with certain affirmative and restrictive covenants under our Credit Facilities, Secured Notes, Unsecured Notes and Mortgages Notes. We are also required to comply with a first lien net leverage ratio covenant under the Revolving Credit Facility, which requires us to maintain a first lien net leverage ratio, if 30.00% or more of the Revolving Credit Facility commitments are outstanding shortly after the end of any fiscal quarter (excluding all cash collateralized undrawn letters of credit and other undrawn letters of credit up to $20.0 million).
As of December 31, 2023, we were either in compliance in all material respects with the covenants or the covenants were not applicable.
Future Maturities of Long-Term Debt
Aggregate annual future maturities of long-term debt, excluding unamortized debt discounts and issuance costs and fair value adjustments, at December 31, 2023 were as follows:
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