RLPC-Fitness First escapes administration
LONDON, June 20 |
LONDON, June 20 (Reuters) - UK gym chain Fitness First has avoided administration after creditors backed plans to restructure its lease agreements, the company said, prompting the sale of around half of its UK gyms and a 600 million pound ($942.80 million) debt write off.
Creditors at a meeting on Wednesday overwhelmingly approved a Company Voluntary Arrangement (CVA) - which lets a company with debt problems reach a voluntary agreement with its business creditors over the repayment of that debt.
The CVA enables a rent renegotiation on some of the 79 gyms it is set to keep as prior rent commitments were unsustainable.
Fitness First will now seek to sell 67 of its UK gyms. The sale should happen in the next few weeks and a number of rival gym operators have expressed interest.
The company's wider financial restructuring can also kick in now the CVA has been approved. Lenders which include distressed investment funds Marathon and Oaktree Capital, agreed to wipe out 600 million pounds of debt in return for a 75 percent equity stake. Marathon and Oaktree will acquire the remaining 25 percent by providing a new 100 million pound credit facility.
Fitness First had been struggling to service its debts and breached first-quarter covenants after BC Partners failed to sell parts of the business last year to repay its debt.
Distressed investors were attracted to Fitness First as traditional lenders decided to sell out of the company at a discount after losing confidence in the health club sector, which is suffering in the economic downturn as consumers cut discretionary spending.
KPMG, which is administering the CVA, said it was a vital lifeline to avoid administration and should always offer a better return to creditors. It is estimated around 25 to 35 pence in the pound will be given to compromised landlords via the CVA compared to less than 1 pence if an administration went ahead.
BC Partners bought Fitness First in 2005 for 1.2 billion euros. It tried to float its Australian and Asian operations in Singapore in 2011 but pulled the process due to market volatility. BC Partners will also receive a small upside in the company's equity by receiving warrants to buy shares.
- Tweet this
- Share this
- Digg this