Gym operator 24 Hour Fitness Worldwide planning for a potential bankruptcy even has it begins reopening its locations.
The fitness company, which has more than 430 mid-tier gyms, has been talking with investors about the terms of a loan that would keep the company afloat during a court restructuring process, according to Bloomberg. The possible Chapter 11 filing would cut the company’s borrowings by exchanging debt for equity and putting lenders in control. Investment bankers at Lazard and attorneys at Weil, Gotshal & Manges are advising 24 Hour Fitness on the process.
The company was struggling to hold onto customers even before the pandemic, with many flocking to gyms that were either more upscale or more affordable. It reported a 2 percent decline in revenue in its unaudited fourth-quarter earnings report, and membership dropped from 3.5 million to 3.4 million from the second to third quarter last year.
The fitness and health club industry could shrink from an $85 billion industry to a $45 billion industry this year amid mandated closures due to the pandemic, according to estimates from WinterGreen Research . About 45 percent of states have started letting clubs at least partially reopen, but this is not the case in some of the most populous states like New York and California. Clubs have so far reported around 30 to 50 percent of members returning.
New York Sports Club is also considering a Chapter 11 bankruptcy filing in the wake of its failed FlyWheel deal.
24 Hour Fitness has implemented new health and safety measures including a touch-free check-in service and 30-minute closures for cleanings throughout the day. [Bloomberg] — Eddie Small