24 Hour Fitness has filed for Chapter 11 bankruptcy protection in Delaware citing fallout from the COVID-19 pandemic that forced it to close its gyms across the United States in the middle of March.
The company permanently closed 100 gyms in the U.S. and has about 300 remaining. It expects a majority of its locations to be reopened by the end of June.
In its filing, the company said it has secured $250 million in debtor-in-possession financing to continue operations as it reopens. According to a report from Bloomberg, the company drew down its $120 million credit line since the onset of the pandemic. It had debt of $1.3 billion since a leveraged buyout in 2014.
“If it were not for COVID-19 and its devastating effects, we would not be filing for Chapter 11. With that said, we intend to use the process to strengthen the future of 24 Hour Fitness for our team and club members, as well as our stakeholders,” chief executive officer Tony Ueber said in a statement. “We expect to have substantial financing with a path to restructuring our balance sheet and operations to ensure a resilient future.”
The bankruptcy comes as middle-tier gyms struggle to hold on to customers who are switching to lower-cost gyms or alternatives like Peloton, which saw its revenue jump 66% in the third quarter.
Gold’s Gym filed for bankruptcy in May. Town Sports International, which owns New York Sports Club and other city clubs, said it is actively considering strategic alternatives as it faces a heavy debt load and does not have the cash on hand to make payments in the near term.
The CEO of 24 Hour Fitness, which is privately held, said the restructuring would result in “reinvestment in our existing clubs, opening new clubs, and introducing several new innovative products and services.”
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