Commercial Property Gym Company Fitness First in Debt Deal

Posted on 11 June, 2012 by MOVEHUT

The country’s largest commercial property gym company is set to shed almost half of its sites as it attempts to avoid falling into administration.

Established in Bournemouth in 1993, commercial property Fitness First has approximately 150 gyms in the UK and is struggling to keep up rental payments after a fall in membership revenues.

The struggling commercial property business, which has around 10,000 employees worldwide, has proposed a company voluntary agreement (CVA) with its creditors, primarily its 120 landlords, to shrink its £560m debt.

CVA’s has been controversial in the past because they leave proprietors out of pocket. However, in the case of Fitness First, the commercial property company has offered proprietors a “claw-back” on future incomes if they agree to sign up to the deal.

Richard Fleming, who heads restructuring for accountants KPMG and is organising the deal for the commercial property company, Fitness First, said: “We estimate that the return to compromised landlords to be within a range of 23-28p in the pound, versus less than 0.5p in the pound in administration.”

Last week, unsecured creditors including suppliers and landlords were handed just 3p in the £1 after the collapse of video games commercial property retailer Game.

Liz Peace, Chief Executive at British Property Federation said: “Fitness First is clearly a business in some distress that requires restructuring, and landlords will consider the CVA offer on a business-by-business and a site-by- site basis.”

Peace added: “However, it is extremely welcome to see a ‘claw-back’ arrangement included in the CVA and we hope that this further establishes a precedent that the use of these provisions should be included as a matter of course in future CVA’s.”

Mr Fleming added: “The CVA is part of a wider restructuring of the company, involving the transfer of the equity to the debt holders and the injection of a new £100m loan facility from the lenders. The wider financial restructuring is dependent on the approval of the CVA by the creditors.”

A source close to the gym said a number of commercial property companies have expressed interest in the 67 commercial property sites that will be transferred to competitors over the next six months and it is alleged the easyJet founder is expected to be one of the largest beneficiaries.

Sir Stelios opened his first pay-as-you-go commercial property gyms in Slough and North London last year and wants to develop his empire.

Commercial property Fitness First biggest lenders, investment houses Marathon and Oaktree Capital, have at present agreed to write off more than £560m of debt in return for over 90 per cent of the equity in the commercial property company.

The vote on the CVA is set for June 20, with commercial properties facing either closure, a sale or the possibility of being run by Fitness First on behalf of the landlords.

Fitness First is the world’s largest commercial property gym operator but has seen its profits shrink from £146m to £115m over the last five years.

The company was brought for £835m in 2005 by buy-out commercial property firm BC Partners, which has seen almost all its investment wiped out. The company has also put 24 of its Australian sites up for sale.

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