24 Hour Fitness
UPDATE 1: 24 Hour Fitness $250M DIP Backstopped by Ad Hoc Group; Reorganization Talks Ongoing
Mon 06/15/2020 06:56 AM
UPDATE 1: 6:56 a.m. ET 6/15/2020: The 24 Hour Fitness Worldwide bankruptcy docket is available here. The company issued a press release saying the filing is due to the “disproportionate impact of the COVID-19 pandemic” and that the debtors expect to secure approximately $250 million in DIP financing. The company has filed its DIP motion and related declaration in support.
According to the first day declaration of FTI’s Daniel Hugo, the debtors’ CRO, the DIP is “fully backstopped” by members of an ad hoc group holding approximately 63.3% of the aggregate principal amount outstanding under the Prepetition Credit Facility and approximately 73.9% of the face amount of the Senior Unsecured Notes” (emphasis added). The debtors have “engaged in productive discussions with the Ad Hoc Group around a holistic reorganization, and the Debtors expect these discussions will continue postpetition, with the goal of building consensus around a deleveraging transaction and filing a plan of reorganization in the near term,” says Hugo.
The declaration adds, “[p]ut simply, the COVID-19 pandemic upended the Debtors’ operating model, leaving the Debtors without a source of revenue to fund their operations,” and the debtors enter chapter 11 with less than $9 million in cash on hand. However, the debtors are “confident that they not only can endure the crisis that COVID-19 has presented, but also can transform and modernize their business model in a way that leads to long-term success.”
Hilco and the debtors “have already begun negotiations with their landlords to facilitate the cost savings necessary to rightsize their go-forward club footprint, and the Debtors further expect to exit certain clubs during these chapter 11 cases.”
Weil Gotshal and Pachulski Stang Ziehl & Jones are serving as the debtors’ legal counsel, FTI has been retained as financial advisor, Lazard is serving as investment banker and Prime Clerk is the debtors' claims and noticing agent. O’Melveny & Myers and Richards, Layton are counsel to the ad hoc group, and PJT Partners LP is financial advisor to the ad hoc group.
The company’s capital structure is reported in the first day declaration as follows:
The DIP budget is as follows:
Click HERE to enlarge
According to the company’s press release, “24 Hour Fitness is continuing to reopen clubs in a phased approach and welcome members in locations nationwide, carefully following state and local government and public health agency guidelines” and “the Company expects to reopen the majority of its footprint by the end of June.” Further “[d]uring the time of phased club reopenings, all club members will have access to any available 24 Hour Fitness club through the end of 2020, regardless of membership level.”
According to the 24 Hour Fitness Worldwide petition, the largest equity holders of 24 Hour Holdings II LLC are:
An organizational chart is shown below:
Original Story 12:29 a.m. UTC on June 15, 2020
BREAKING: 24 Hour Fitness Files Chapter 11 in District of Delaware
Relevant Document:
Petition
24 Hour Fitness has just filed a chapter 11 petition in the Bankruptcy Court for the District of Delaware. According to the petition, the debtors have $1 billion to $10 billion in both assets and liabilities.
More to come...
According to the first day declaration of FTI’s Daniel Hugo, the debtors’ CRO, the DIP is “fully backstopped” by members of an ad hoc group holding approximately 63.3% of the aggregate principal amount outstanding under the Prepetition Credit Facility and approximately 73.9% of the face amount of the Senior Unsecured Notes” (emphasis added). The debtors have “engaged in productive discussions with the Ad Hoc Group around a holistic reorganization, and the Debtors expect these discussions will continue postpetition, with the goal of building consensus around a deleveraging transaction and filing a plan of reorganization in the near term,” says Hugo.
The declaration adds, “[p]ut simply, the COVID-19 pandemic upended the Debtors’ operating model, leaving the Debtors without a source of revenue to fund their operations,” and the debtors enter chapter 11 with less than $9 million in cash on hand. However, the debtors are “confident that they not only can endure the crisis that COVID-19 has presented, but also can transform and modernize their business model in a way that leads to long-term success.”
Hilco and the debtors “have already begun negotiations with their landlords to facilitate the cost savings necessary to rightsize their go-forward club footprint, and the Debtors further expect to exit certain clubs during these chapter 11 cases.”
Weil Gotshal and Pachulski Stang Ziehl & Jones are serving as the debtors’ legal counsel, FTI has been retained as financial advisor, Lazard is serving as investment banker and Prime Clerk is the debtors' claims and noticing agent. O’Melveny & Myers and Richards, Layton are counsel to the ad hoc group, and PJT Partners LP is financial advisor to the ad hoc group.
The company’s capital structure is reported in the first day declaration as follows:
The DIP budget is as follows:
Click HERE to enlarge
According to the company’s press release, “24 Hour Fitness is continuing to reopen clubs in a phased approach and welcome members in locations nationwide, carefully following state and local government and public health agency guidelines” and “the Company expects to reopen the majority of its footprint by the end of June.” Further “[d]uring the time of phased club reopenings, all club members will have access to any available 24 Hour Fitness club through the end of 2020, regardless of membership level.”
According to the 24 Hour Fitness Worldwide petition, the largest equity holders of 24 Hour Holdings II LLC are:
- AEA, which holds 42.7%;
- Fitness Capital Partners LP, which holds 31.2%; and
- 2411967 Ontario Limited, with 22.8%.
An organizational chart is shown below:
Original Story 12:29 a.m. UTC on June 15, 2020
BREAKING: 24 Hour Fitness Files Chapter 11 in District of Delaware
Relevant Document:
Petition
24 Hour Fitness has just filed a chapter 11 petition in the Bankruptcy Court for the District of Delaware. According to the petition, the debtors have $1 billion to $10 billion in both assets and liabilities.
More to come...
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