Health club chain 24 Hour Fitness has filed for Chapter 11 bankruptcy protection, blaming the "disproportionate impact of the COVID-19 pandemic" on its operations.
There have been
rumours the company might be forced to make this move for some weeks.
“If it were not for COVID-19 and its devastating effects, we would not be filing for Chapter 11," said CEO Tony Ueber.
"With that said, we intend to use the process to strengthen the future of 24 Hour Fitness for our team and club members, as well as our stakeholders."
As part of the process, the operator will close up to a quarter of its existing gyms.
"We’ve made the difficult decision to close more than 100 clubs that were either out-of-date or in close proximity to other 24 Hour Fitness locations," Ueber said.
Before the Chapter 11 announcement, the company had around 430 locations.
He added that 24 Hour Fitness will "continue to reopen existing clubs in a phased approach" as lockdown measures are eased and that it expects to reopen the "majority of its footprint by the end of June".
In conjunction with the Chapter 11 process, the company said it expects to secure around US$250m in debtor-in-possession (DIP) financing.
Subject to approval from the courts, the DIP financing – combined with cash from operations – should provide sufficient liquidity and allow the company to continue operations, including club reopenings, without interruption during the Chapter 11 process.
“We expect to have substantial financing with a path to restructuring our balance sheet and operations to ensure a resilient future," Ueber added.
"The COVID-19 environment has proved that attention to health and fitness is more important now than ever before.
"As a result of this restructuring, we will gain financial strength and flexibility to accelerate our business transformation plan, which includes reinvestment in our existing clubs, opening new clubs and introducing several new innovative products and services that will enhance the fitness experience for our club members and guests for many years to come.”
