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Deutsche Bank, KeyBanc Arrange Town Sports’ $370MM Facility

November 18, 2013, 08:00 AM

Town Sports International Holdings, Inc. announced that its indirect wholly-owned subsidiary, Town Sports International, LLC has entered into a $325.0 million term loan facility and a $45.0 million revolving loan facility. The proceeds from the term loan facility were used to repay all amounts outstanding under the Borrower’s existing credit agreement and to pay related fees and expenses. None of the revolving loan facility was drawn upon.

Deutsche Bank Securities Inc. and KeyBanc Capital Markets Inc. served as joint lead arrangers and joint bookrunning managers for the credit facilities.

“We are pleased we have completed this refinancing which reduced our borrowing costs and extended the term on our debt. This refinancing also provides the Company with more flexibility, including flexibility to return value to our stockholders in the form of a dividend.”

The new term loan facility matures on November 15, 2020 and the new revolving loan facility matures on November 15, 2018.

Borrowings under the term loan facility and the revolving loan facility, at the Borrower’s option, bear interest at either the administrative agent’s base rate plus 2.5% or a LIBOR rate adjusted for certain additional costs (the “Eurodollar Rate”) plus 3.5%, each as defined in the new credit agreement. The Eurodollar Rate has a floor of 1.00% and the base rate has a floor of 2.00%, each with respect to the outstanding term loans. Commencing with the last business day of the Borrower’s fiscal quarter ending March 31, 2014, the Borrower is required to pay 0.25% of the principal amount of the terms loans each quarter, which may be reduced by voluntary prepayments. Mandatory prepayments under the new credit agreement are required with respect to certain asset sales, insurance recovery and incurrence of certain other debt and, commencing in 2015, in certain circumstances relating to cash flow for the prior fiscal year in excess of certain expenditures.

In connection with entering into the new credit agreement, the Borrower amended and restated its existing interest rate swap arrangement, which will now have a notional amount of $160 million and will mature on May 15, 2018. The swap will effectively convert $160 million of variable-rate debt under the new credit agreement to a fixed rate of 5.38%, when including the applicable 3.50% margin described above.

At current interest rates, the Company expects cash payments related to interest charged on this new credit agreement to be approximately $2.8 million less on an annual basis than annual cash payments required for interest on the Borrower’s existing credit facility. The expected savings on interest assumes a $9.3 million increase in total term loan principal outstanding versus the existing facility and the impact of the interest rate swap described above.

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