Lawyers representing beleaguered gym chain Fitness First have asked a High Court judge to reject objections from landlords and approve a restructuring plan that would see some gyms close and others pay lower rents.
Five landlords, including Lazari Properties and the Crown Estate, oppose the deal, saying they want more time for negations. However, Fitness First argues that the alternative to the plan is administration and, as the landlords are unsecured creditors, they stand to lose all their money.
According to court papers, Fitness First has divided its 40 locations into six classes (A, B1, B2, B3, C and D) based on the profitability of the location.
It proposes that landlords of Class A properties will have no changes to their terms. Class D properties will be vacated, and all other properties will see a decrease in rent of 30-60% for a three-year period.
In court papers, the gym said it was “disappointing” that the five landlords are opposed, “even though the plan improves their economic position by comparison with the (inevitable) alternative of insolvency”.
According to court papers, the gym, which was profitable before the Covid-19 pandemic, has been hit hard by changing fitness trends caused by the pandemic. It is being kept afloat by almost £15m of shareholder funding.
However, the papers stated that “the most recent funding was subject to a condition that the group pursue a restructuring to put it back on a viable footing. Absent this condition being satisfied, the group will not be able to access the funding which it needs for its operations and will go into administration.”
The business owes its primary secured creditors almost £19m and HMRC more than £500,000. The landlords are unsecured creditors.
The business is privately held, with 75% of the shares owned by Jayne Best, the daughter of sportswear tycoon Dave Whelan, and the rest owned by other family members.
The case is scheduled to last for two days, with a ruling handed down soon after.
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