The owner of the New York Sports Clubs chain is considering a bankruptcy filing as gyms across the country remain closed to stop the spread of coronavirus.
Even before the virus shuttered the global economy, a number of gym chains were struggling with onerous debt loads. With no certainty on when they’ll be able to reopen or whether they’ll have access to additional government aid, those troubles have been exacerbated.
Town Sports is getting advice from lawyers at
Representatives for New York-based Town Sports, Olshan, Gibson and FTI didn’t immediately respond to messages seeking comment.
The situation remains fluid and plans could change, the people said. Variables include the duration of the shutdown, with revenue suffering across the fitness industry because of the pandemic.
Another weakness came in the company’s annual report, which warned last month that there’s substantial doubt about its survival. Inclusion of the “going concern” statement counts as an event of default on the company’s term loan facility, which means lenders can call the debt before its maturity, according to the filing.
Town Sports, which operates the New York, Boston, Philadelphia and Washington Sports Clubs, was looking for a financial reprieve through a deal to buy the indoor cycling studio business of Flywheel Sports, owned by
The chain, with 600,000 members, wanted to use part of the financing from Flywheel’s owners to replace a loan coming due in November. But plans
Before the company was forced to shut its doors, Town Sports
In the meantime, Town Sports is entangled in customer
It’s uncertain when the clubs will re-open and the company is “likely to experience reduced customer demand, a significant increase in membership terminations and may be unable to recover these members or generate new ones,” according to last month’s filing.
Town Sports borrowed $12.5 million from its revolving credit facility after it was forced to close 95% of its clubs. The company reported around $178 million of debt outstanding under its term loan as of year-end, according to the report, and acknowledged cash wasn’t sufficient to cover its November obligation.
New York Sports Clubs began operations as a cluster of squash clubs in the 1970s before introducing exercise classes and expanding up and down the U.S. East Coast. The company operates about 200 fitness studios, with a majority in the New York metro area.
(Adds share price in second, penultimate paragraphs.)
To contact the editors responsible for this story:
Shannon D. Harrington
© 2020 Bloomberg L.P. All rights reserved. Used with permission.