Delaware Chapter 11: 24 Hour Fitness Worldwide, Inc.
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Significant first day motions can be accessed by clicking on the case title above.
CASE DETAILS
On June 15, 2020 (the “Petition Date”), 24 Hour Fitness Worldwide, Inc. and ten affiliates (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Debtors are represented by Weil, Gotshal & Manges LLP as lead counsel, and Pachulski Stang Ziehl & Jones LLP as Delaware counsel. The case has been assigned to the Honorable Karen B. Owens.
INTRODUCTION
Founded in 1983, the Debtors comprise one of the nation’s leading operators of health and fitness clubs, operating out of two headquarter locations in San Ramon, California, and Carlsbad, California. As of March 31, 2020, the Debtors served approximately 3.4 million members in 445 locations across the U.S., all of which are leased. The Debtors generate revenue primarily through various club membership fees and the sale of related goods and services, such as fitness apparel, food and beverage concessions, and personal training sessions.
The Debtors employ approximately 10,200 individuals in twenty-two states across the U.S., including approximately 2,100 on a full-time basis and approximately 8,100 on a part-time basis. As of the Petition Date, the Debtors have furloughed approximately 9,200 of their employees and fewer than 1,000 employees remain active. No employees are party to collective bargaining agreements or are members of labor unions. In addition, the Debtors employ approximately ten individuals as independent contractors or on a seasonal basis to supplement the efforts of their employees.
DEBTORS’ FINANCIAL POSITION AND CHAPTER 11 STRATEGY
The Debtors’ have $1.4 billion of funded debt with $930.3 million in principal amounts outstanding under their prepetition credit facility, and $500 million in principal unsecured bond debt, as well as substantial expense associated with the Debtors’ club fleet (Affidavit p. 23-27). In 2019, the company generated revenue and adjusted EBITDA performance of $1.5 billion and $191 million, but had several systemic issues related to management that were being addressed by new member growth initiatives and streamlining of their product platform. These initiatives were set back by the COVID-19 pandemic which resulted in a total shutdown of the Debtors’ operations. The Debtors have engaged Hilco Real Estate, LLC to reevaluate their leases across the country to further strengthen operations. The Debtors are entering chapter 11 with less than $9 million on hand.
DEBTOR-IN-POSSESSION FINANCING AND Restructuring Support
The Debtors have secured debtor-in-possession financing from a combination of some of their senior secured lenders (approximately 63%) and some of their senior noteholders (approximately 73.9%) who will backstop a $250 million new money senior secured facility. They have not yet reached an accord with their stakeholders on a broader reorganization strategy or restructuring support agreement.
Significant first day motions can be accessed by clicking the case title the client alert above and the link below.
TOP UNSECURED CREDITORS LIST AND FIRST DAY MOTIONS
- Customer Programs Motion
- Critical Vendors Motion
- Declaration in Support of Critical Vendors Motion
- DIP Motion
- Employee Wages Motion
- Insurance Motion
- Lease Rejection Motion
- NOL Motion
- Taxes & Fees Motion
- Transportation Motion