Town Sports International, the parent of New York Sports Club and Boston Sports Club, said in a regulatory filing that it has breached covenants under its loan agreements and may be forced to file for bankruptcy “in the near future.” The fitness chain operator had previously warned of a possible bankruptcy filing in June.
In the filing, Town Sports said it is currently working with prospective lenders to refinance its 2013 Term Loan Facility in advance of its maturity date on November 15, 2020. However, the company said it “does not have sufficient sources of cash to satisfy its obligations under the 2013 Term Loan Facility on the date of maturity.”
The company also missed a payment on its revolver last month. Lenders could send the company a notice of default and demand immediate repayment of all obligations, although none have taken that step, Town Sports said in the filing.
Town Sports wrote, “As a result of the company’s strained cash position and current inability to repay all amounts outstanding under the 2013 Term Loan Facility and 2013 Revolving Loan Facility, and the challenges of COVID-19, we currently anticipate that TSI LLC, Holdings II and certain other subsidiaries of the company that constitutes the Subsidiary Guarantors (as defined in the Credit Agreement) may be forced to file a petition for relief under the United States Bankruptcy Code (the “Bankruptcy Code”) in the near future.”
The filing further said equity holders are “at significant risk of losing some or all” of their investments in the firm. Town Sports added that in the event of a bankruptcy filing, the company will “need to raise up to approximately $80 million in financing to fund the costs associated with the bankruptcy filing, professional fees in connection with the bankruptcy and to cover operating shortfalls.”
Town Sports brands include New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs, Washington Sports Clubs, Lucille Roberts, TMPL Gym, Total Woman Gym and Spa, and recently-acquired Flywheel Sports.
Photo courtesy New York Sports Club
