Well-known gym chain, LA Fitness, has announced a restructuring plan which will see 33 of its branches put up for sale.
CEO of LA Fitness commented the restructuring will create a ‘leaner, more operationally efficient business’ and will ‘significantly reduce its debt burden’. He also said they will have the ‘financial strength’ to be able to invest in more equipment for the clubs that are staying.
The gym chain is proposing a CVA to its landlords as part of the restructuring plans, partly to revise rent leases and hopefully shrink their debt by around £250 million. In order for this restructuring plan to go ahead, the CVA must be approved by the majority of creditors at the creditors’ meeting on the 24th March. If the proposal is rejected, the company will likely face administration.
Neville Khan and Matt Smith of Deloitte have been appointed to assist with the CVA proposal.
A couple of years ago, we blogged about Fitness First proposing a similar CVA to landlords - see more here.
UPDATE - 26th March: The landlords CVA has been approved by over 90% of creditors.
Neville Kahn of Deloitte commented, "The vote in favour of the CVAs enables LA fitness to address the structural issues that were hampering the group by revising lease terms at a number of its clubs".
"The approval of the CVAs also paves the way for the implementation of an agreed restructuring package that will reduce the group’s debt burden by around £250 million, allowing LA fitness to continue investing in facilities, equipment and technology across its retained portfolio of clubs".