FITNESS First will shed nearly half of its UK gyms under the terms of a proposed company voluntary arrangement (CVA) aimed at saving the struggling group from administration.
The world’s largest health club operator wants landlords of its 147 UK properties to back the terms of the CVA, which will see Fitness First offload 67 clubs in the next six months. Under administrators KPMG, the CVA will also reduce rents on remaining properties, with landlords able to claw back about £5 million should the company eventually emerge in a healthier state.
KPMG said affected landlords would receive around 23p-28p upfront for each £1 owed, versus 0.5p in the event of liquidation. Three-quarters of creditors have to approve the CVA in order for the arrangement to go ahead.
Revenues have been squeezed at Fitness First as cash-strapped consumers either quit the gym or defect to lower-cost rivals.
Two of the company’s biggest lenders, Marathon and Oaktree Capital, have already agreed to write off more than £560m of debt in return for taking a reported 75 per cent stake in the business. A fresh capital injection of £100m will also be made available.
However, that part of the restructuring is dependent upon the CVA going ahead.
Fitness First is owned by private equity group BC Partners, which bought the business in 2005. According to its website, it owns more than 430 clubs worldwide.
Headquartered in Poole, the company has about 1,500 staff in the UK. In Scotland, it operates gyms in East Kilbride, Glasgow and Kilmarnock.
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