Crunch gym chain bankrupt, agrees to be sold
NEW YORK May 6 (Reuters) - Crunch Fitness, a chain of 22 gyms with 73,000 members in six U.S. cities, filed for bankruptcy protection on Wednesday because of declining membership and expensive leases and said it has agreed to be bought by its senior secured lenders.
AGT Crunch Acquisition LLC, which operates gyms in New York, Miami, Chicago, Los Angeles, Atlanta and San Francisco, said in a statement it plans to be acquired by New Evolution Fitness Co and certain affiliates of investment company Angelo, Gordon & Co in a court sales process that allows rival bids.
Crunch expects the deal to close in 60 days, subject to approval from U.S. Bankruptcy Court in Manhattan, where it filed for Chapter 11 protection.
CH Fitness, the joint venture of creditors seeking to buy Crunch, bought out all of its first lien debt from Goldman Sachs Credit Partners for $46.2 million in December and committed to fund up to an additional $17 million for working capital, according to court documents.
The gym chain said it has secured enough capital to fund its operations while it reorganizes.
Crunch had sales of $84.5 million in 2008 with operating losses of $11.2 million, according to the filing.
Crunch Chief Financial Officer Michael Jacobs blamed those losses on "deficient membership sales and the inability of the Debtors to divest themselves of certain unprofitable club locations that are saddled with overpriced long-term leases," according to court documents.
Crunch listed assets between $100 million and $500 million, and liabilities in the same amount, and has 1,716 employees.
All but two of its locations will remain open, with members at the two affected Manhattan gyms being transferred to other Crunch locations.
The case is In re AGT Crunch Acquisition LLC, U.S. Bankruptcy Court, Southern District of New York, No 09-12889. (Reporting by Phil Wahba, editing by Leslie Gevirtz)