24 Hour Fitness is considering bankruptcy protection that could come in weeks as it seeks a financing package to stay open after the coronavirus pandemic, the Wall Street Journal reported.
“We are considering a broad range of options to ensure the long term sustainability and success of 24 Hour Fitness, and we are not going to comment publicly on our strategic plans. We look forward to continuing the reopening of our clubs,” 24 Hour Fitness said in an e-mail.
24 Hour Fitness has been in talks with landlords and plans to close some of its 420 gyms permanently in bankruptcy, according to the report.
CNBC previously reported that Lazard and Weil, Gotshal & Manges had been retained to explore financial options, including bankruptcy.
On March 27, Moody’s downgraded the debt rating of 24 Hour Fitness. Moody’s said at the time, “The downgrade reflects 24 Hour Fitness’ rapidly deteriorating operating performance and the resultant very high leverage, weak liquidity and high likelihood of a distressed exchange or other default. The company’s negative membership trends, very high interest burden and negative free cash flow prior to the coronavirus outbreak, as well as approaching maturities, provide limited flexibility to manage through the crisis. The downgrade is in response to the disruption in fitness club visitation resulting from efforts to contain the spread of the coronavirus including recommendations from federal, state and local governments to avoid gatherings. These efforts include mandates to close gyms on a temporary basis. The downgrade also reflects the negative effect on consumer income and wealth stemming from job losses and asset price declines which will diminish discretionary resources to spend at fitness clubs once this crisis subsides. The instrument rating downgrades additionally reflect Moody’s expectation that recovery values for the credit facility and unsecured notes will be weak in the event of a default in the current economic environment.”
Photo courtesy 24 Hour Fitness