N.D. Texas Chapter 11: GGI Holdings, LLC (Gold’s Gym)
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All Documents Can Be Accessed by Clicking the Case Title Immediately Above
INTRODUCTION
Link: Petition Joint Administration Motion
On April 5, 2020 (the “Petition Date”), GGI Holdings, LLC and fourteen of its 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 Northern District of Texas, Dallas Division. The Debtors are represented by Dykema Gossett PLLC. The case has been assigned to the Honorable Harlin DeWayne Hale. A hearing on the Debtors’ first day motions was held via WebEx on Wednesday, May 6, 2020 at 2:30 p.m.
ABOUT THE DEBTORS
Link: Affidavit in Support
Founded in 1965 in Venice Beach, California, the Debtors are one of the largest networks of company-owned and franchised fitness centers in the world. The Debtors own and operate approximately ninety-five gyms domestically, and hold franchise agreements for more than 600 gyms domestically and internationally, serving approximately three million people per day. Prior to the closures caused by the COVID-19 pandemic, the Debtors employed over 4,600 employees at the corporate offices and company-owned gyms. As of the Petition Date, the Debtors employ approximately 111 active employees and 4,597 furloughed employees.
While many factors led to the need for bankruptcy relief, the Debtors state that no single factor caused more harm than the COVID-19 pandemic. In mid-March, the Debtors were forced to temporarily close all company-owned gyms, and franchisees around the U.S. followed suit within days or weeks. As of the Petition Date, all company-owned gyms remain closed. As a result, the Debtors have been unable to collect membership dues and have no other revenues being derived from their gym operations or franchising fees.
The Debtors began contacting their landlords in late March and early April to advise that they were unable to make ordinary rental payments in April and to request abatements or concessions. As of the filing, the Debtors have continued discussions with the majority of their landlords and believe they will be able to cure and assume the majority of the leases for their company-owned gyms. The Debtors determined that approximately thirty-two of their company-owned gyms could not be renegotiated; the Debtors decided to close those gyms, reject the leases as part of the bankruptcy filing, and abandon any remaining assets in those locations.
The goal of the bankruptcy is to ensure the strength and continuity of the Debtors’ business so that there is no disruption to members, franchisees, or licensees once the Debtors and their franchisees are able to reopen their respective gyms.
FINANCIAL CONDITION
As of the Petition Date, the Debtors estimate $51.3 million is outstanding under a credit agreement with JPMorgan Chase Bank, N.A., Bank of America, N.A., and Wells Fargo Bank, N.A., and which includes approximately $1.65 million in outstanding letters of credit. These obligations are secured by security interests and liens in substantially all of the Debtors’ assets, including, but not limited to, the Debtors’ cash, cash equivalents, accounts receivable, deposits, intellectual property, and other assets. In addition, the Debtors have over $10 million in trade debt (of which $2.3 million is owed to critical vendors), $7 million in rental obligations owed to landlords, and potentially more owed to customers, franchisors and other interested parties. The Debtors further anticipate that the total allowable claims asserted by landlords in these cases, whether based on rejection damages, indemnification agreements and other liabilities, will range from $30-$55 million.
DIP/CASH COLLATERAL MOTION
Links: DIP Motion DIP Budget
The Debtors are seeking approximately $20 million in financing from its majority owner TRT Holdings, Inc. The Debtors intend to borrow enough funds to operate in the ordinary course of business during these cases and anticipate needing approximately $3.5 million in new financing during the first fourteen days; $9 million in the first thirty days; and up to $20 million over the course of the thirteen-week budget period. Milestones under the agreement include the filing of a plan by May 15, 2020, approval of a disclosure statement by June 15, 2020, and confirmation of a plan by August 1, 2020.
Related First-Day Motions Can Be Accessed by Clicking on the Links Below
SUMMARY OF FIRST DAY MOTIONS (Excel chart)