Fitness First restructuring today approved by creditors

Screen shot from Fitness First home page

The long-term restructuring of Fitness First took a  significant forward step today after the required majority of unsecured creditors (approval for a CVA requires 75% consent from affected creditors) agreed the Company Voluntary Arrangement (CVA) led by KPMG.

 

62 of the company’s UK clubs are involved in the CVA which involves:

  • Landlords being paid monthly instead of quarterly.
  • Some landlords accepting a reduction in rent to approximately 65% of the pre-CVA level.

A further 17 clubs are not part of the CVA which means that a total of 79 clubs will form Fitness First’s portfolio, once unwanted clubs are disposed of.

Company Voluntary Arrangement (CVA)

The use of a CVA as a turnaround instrument polarises opinion because they often leave unsecured creditors such as property landlords and suppliers with little hope of recovering a reasonable proportion of outstanding debts. However, with the Fitness First CVA I understand that KPMG has proposed a ‘claw back’ clause which allows the compromised landlords to share in the turnaround of the business.

Fitness First comment

Andy Cosslett, CEO Fitness First comments: “The strong support for the CVA by our landlords is a critical step in the restructuring of Fitness First. We will have a well financed balance sheet and a profitable portfolio of clubs worldwide. This gives us a strong platform on which to build. We are now drawing up plans to increase investment in our existing clubs, increase the number of markets in which we operate and increase our levels of service and innovation for the benefit of our million plus members worldwide”

It would be great to hear from any parties directly involved in the CVA.