Source: David Feltkamp
Fitness First is to sell 67 of its UK gyms and has issued a company voluntary arrangement to landlords in a bid to restructure its remaining leases.
The gym operator says it wants to retain 80 of its 147 clubs in the UK, of which 62 will be included in the CVA process. This is being supervised by KPMG and is expected to take around three weeks to complete.
The company wants 57 sites to move to monthly rents and five marginal sites to see rents cut to 65% of existing terms for three years, before reverting to market rents thereafter. A further 18 sites held in alternative Fitness First companies are unaffected.
The CVA proposes that the sites up for sale receive 55% rent for six months, even if a new tenant is found, with any business rate liabilities picked up when the six months elapses.
Demand for the unwanted sites is believed to be high, with budget gym operators expressing a strong interest.
According to the British Property Federation, the move, if accepted by creditors, would see landlords receive between 23-28p in the pound and would represent a considerable improvement on the 0.3p made available to the unsecured creditors of collapsed video games retailer Game earlier this week.
The CVA will also contain a ‘claw back’ clause which allows compromised landlords to share in the turnaround of the business. The BPF says this could see landlords share up to £5m depending on the future profitability of the restructured company.
The CVA requires the consent of 75% of creditors to take effect. Landlords and unsecured creditors will vote on the proposed CVA on 20 June.
Fitness First said it would continue to invest in infrastructure, facilities and equipment at the clubs it plans to keep.
Of the 67 clubs up for sale, most are expected to be transferred to other operators, with the majority of Fitness First employees to be kept on by new owners, said the company.
Andy Cosslett, incoming chief executive of Fitness First, said: “We have worked hard with KPMG to put in place a CVA structure which will allow us to renegotiate leases at sites in the UK where current rent levels are unsustainable. At the same time we are selling clubs which no longer fit into our future vision for Fitness First.”
The company agreed a refinancing package on 18 May, which will see lenders convert their debt into Fitness First shares and provide long-term working capital facilities. The club appointed KPMG to review its business in April in a bid to tackle its £600m debt burden.
The following Fitness First clubs are up for sale:
• Acton • Alperton • Ashford • Beckenham • Berkhamsted • Birmingham • Boston • Bow Wharf • Brentwood • Brierley Hill • Bristol Cribbs • Bristol Harbourside • Burton On Trent • Cardiff East • Chatham • Chelmsford • Chesterfield • Colchester • Coleraine • Coventry • Crewe • Derby • Doncaster • East Kilbride • Fitness First for Women Chalk Farm • Fitness First for Women Luton • Fleet • Glasgow • Godalming • Halifax • Holloway • Huddersfield • Hull • Keighley • Kidderminster • Kilmarnock • Klick Bradford Horton • Klick Bromborough • Klick Manchester Gorton • Klick Sheffield • Klick Stoke • Klick Wakefield • Leeds • Lewisham • Luton • Manchester Central • Mansfield • Moston • Newcastle • Newtownabbey • North Finchley • Norwich • Peterborough • Pontefract • Preston • Purley • Reading • Runcorn • Sheffield Millhouses • Southampton • Stevenage • Swindon West • Uxbridge • Walworth Road • York
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