The owner of New York Sports Clubs is planning to file for bankruptcy as soon as Friday after talks for financing that would have helped the chain weather the Covid-19 pandemic fell through.
Town Sports International Inc. was negotiating a potential $80 million capital injection fromKennedy Lewis Investment Management, according to people with knowledge of the matter. The investment firm backed away after Town Sports realized it would need more money and asked for $200 million, the people said, asking not to be identified discussing a private matter.
Representatives for New York-based Town Sports and Kennedy Lewis declined to comment.
The gym owner has been in talks with lenders as it seeks to refinance a loan coming due in November. Negotiations are ongoing but lenders have been reluctant to put in new money or extend the debt, the people said. Kennedy Lewis bought a large chunk of the company’s borrowings when they were trading at a steep discount, the people said.
Town Sports is in discussions with other third parties who could support the company through its restructuring process, the people added. Chapter 11 bankruptcy allows a company to cut its debt load and close underperforming locations while it seeks to turn around its business. The firm’s restructuring plans remain fluid and could change depending on market conditions and virus-related gym closings, the people said.
The fitness industry is reeling from forced closures due to the pandemic. Gold’s Gym International Inc.sought court protection from its creditors in May.24 Hour Fitness Worldwide Inc. filed for bankruptcy in June, unable to keep up with its debt payments with gyms shut nationwide. New York state allowed fitness centers to re-open in September at limited capacity.
Even before the virus nearly ground the global economy to a halt, a number of gym chains were struggling with onerous debt loads. Town Sports, which operates the New York, Boston, Philadelphia and Washington Sports Clubs, was previously looking for a financial reprieve through a deal to buy the indoor cycling studio business of Flywheel Sports, which was owned by Kennedy Lewis.
Town Sports, which has around 600,000 members, wanted to use part of the financing from Flywheel’s owners to replace its loan due in November. But the earlier plans fellapart, and the loan has been trading for less than 16 cents on the dollar, according to Bloomberg data.
New York Sports Clubs began operations as a cluster of squash clubs in the 1970s before introducing exercise classes and expanding up and down the U.S. East Coast. The company operates about 200 fitness studios, with a majority in the New York metro area.
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