24 Hour Fitness Forced Into Ch. 11 By COVID-19 Closures
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Law360 (June 15, 2020, 11:14 AM EDT) — Gym chain 24 Hour Fitness filed for Chapter 11 in Delaware bankruptcy court Monday, saying that after two months without revenues thanks to the COVID-19 pandemic it has no choice but to seek bankruptcy protection.
In court filings, the California-based fitness chain said the shutdown of all 445 of its U.S. locations halted an attempt to correct marketing-related “operational missteps” in recent years and left the company without the cash it needs to stay intact without bankruptcy protection and financing.
“If it were not for COVID-19 and its devastating effects, we would not be filing for Chapter 11,” CEO Tony Ueber said in a statement Monday. “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.”
According to its filings, 24 Hour was founded in 1983 and has 445 locations in the U.S. with about 3.4 million members. At the time it suspended operations in March due to the pandemic, the company said it had about 19,200.
The company has about $1.4 billion in funded debt, it said.
All of the company’s U.S. clubs have been closed since March, and it suspended billing members at the beginning of April, and as a result has had no “material revenues” since that time, Chief Restructuring Officer Daniel Hugo said in his Chapter 11 declaration. The company has laid off about 9,000 employees in response to the closures and an evaluation of its “go-forward club footprint,” he said.
While some clubs have begun to reopen, those reopenings are in their early stages, and the company has only about $9 million in available cash, Hugo said.
The company said it hopes to secure $250 million in debtor-in-possession financing to continue operations through the Chapter 11 case.
24 Hour is represented by Laura Davis Jones, Timothy P. Cairns and Peter J. Keane of Pachulski Stang Ziehl & Jones LLPand Ray C. Schrock, Ryan Preston Dahl and Kevin Bostel of Weil Gotshal & Manges LLP.
The case is 24 Hour Fitness Worldwide Inc. et. al., case number 20-11558, in the U.S. Bankruptcy Court for the District of Delaware.
–Editing by Marygrace Murphy.
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