The fitness chain’s Chapter 11 petition was
24 Hour lined up $250 million in so-called debtor-in-possession financing backed by its creditors as it starts re-opening locations across the country, according to a
While some gyms start to re-open, it’s no guarantee that members will come flocking back, and cancellations could be even more devastating. It costs twice as much to recruit a new member as it does to retain an existing one. Roughly 28 of 100 U.S. gym goers are expected to
Even before the onslaught of Covid-19, middle-tier operators like 24 Hour struggled with customer defections to higher-end or budget-friendly fitness options. The gym operator posted a 2% revenue decline in unaudited fourth-quarter earnings, Bloomberg
Privately held 24 Hour, which had around
Like many other businesses across the U.S., 24 Hour had to close all its locations in mid-March to help stop the spread of coronavirus. The company, based in San Ramon, California, fully drew its $120 million credit line to cope with the expected impact of the pandemic.
Management had been in talks with creditors to rework its debt load, but negotiations ended in a stalemate around the time of the closures, 24 Hour Fitness
“If it were not for COVID-19 and its devastating effects, we would not be filing for Chapter 11,” Chief Executive Officer
A court-supervised restructuring presents opportunities for 24 Hour Fitness beyond reducing its debt load, “including rejecting leases and getting new money in the door to retrofit existing gyms to adhere to new hygiene and social distancing requirements,”
24 Hour Fitness plans to reopen a majority of its footprint by the end of June with new social distancing guidelines in place, allowing members access to any club through the end of the year regardless of membership level, the company said.
However, the company is also seeking to reject at least 135 club leases to cut costs, filings
The majority of locations to be closed are in California and Texas. As many as 8,352 employees, or roughly 46% of the total workforce, could be affected by the changes, according to people with knowledge of the situation. They asked not to be identified discussing a private matter.
Management is working with Lazard as financial advisor, FTI Consulting as restructuring advisor and Weil, Gotshal & Manges LLP as legal counsel.
The case is 24 Hour Fitness Worldwide, Inc. #
(Updates with strategist quote and closure details in paragraphs 10 and 13)
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