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Town Sports International Holdings, Inc. (the “Company”) (NASDAQ: CLUB) today announced that its Board of Directors declared a one-time special cash dividend of $3.00 per share, payable on December 11, 2012 to stockholders of record at the close of business on November 30, 2012 (the “Dividend”). The aggregate amount of the payment to be made in connection with the Dividend will be approximately $71.4 million, based upon shares of common stock outstanding as of November 14, 2012. The Company also announced the payment of an equivalent cash bonus to optionholders holding in-the-money, vested options (the “Cash Bonus Payment”). The aggregate amount of the Cash Bonus Payment will be approximately $2.5 million.
In connection with the above, on November 14, 2012, the Company’s wholly-owned subsidiary, Town Sports International, LLC (the “Borrower”), entered into an amendment to its senior secured credit facility under which it borrowed an additional $60 million. The new borrowings will be used together with cash on hand in order to fund the Dividend and the Cash Bonus Payment. In addition, the amendment to the senior secured credit facility provides for a waiver of any prepayment required to be paid using the Company’s excess cash flow for the period ending December 31, 2012, amends the restricted payments covenant to permit the payment of the Dividend and Cash Bonus Payment and permits adjustments to the Company’s calculation of consolidated EBITDA with respect to the Cash Bonus Payment and with respect to fees and expenses associated with certain permitted transactions.
Daniel Gallagher, Chief Financial Officer of the Company, commented: “We are very pleased we are able to return value to our shareholders through this one-time special dividend. The strength of our financial position and the free cash flow profile of our business enable both this return of capital to our shareholders as well as the self-funding of our club growth plans.”