Bankrupt New York Sports Clubs Owner Seeks Buyer Amid Loan Talks
(Bloomberg) -- The owner of the New York Sports Clubs and Lucille Roberts gyms is searching for a buyer after it reached a preliminary agreement with lenders for financing to help it continue operations while in bankruptcy.
Town Sports International Holdings Inc. has support from its lenders to pursue a sale of its business as part of its reorganization, attorneys for the company said at a virtual hearing on Wednesday. A group led by Tacit Capital will provide the gym owner with interim debtor-in-possession financing and serve as the so-called stalking horse bidder, setting a price floor for the auction overseen in bankruptcy court.
The sale must be approved by U.S. Bankruptcy Judge Christopher Sontchi of Delaware. Town Sports plans to file further details on its plans to market and sell the business next week, said Kirkland & Ellis lawyer Nicole Greenblatt, who represents the company.
The gym owner sought Chapter 11 bankruptcy protection on Monday, unable to keep up with debt payments after it was forced to shut its gyms for months to help stem the spread of Covid-19. Town Sports is seeking to close certain locations permanently, depending on the outcome of landlord talks, according to court papers.
Town Sports is continuing to negotiate terms of the financing that would help support the chain through bankruptcy. The gym chain received two proposals from separate lender groups, one backed by Kennedy Lewis Investment Management and the other by Tacit. Both contemplate a going-concern sale of the business.
New York-based Town Sports reached a tentative agreement with both groups that allows the company to access cash so it can keep operating. Plans call for at least $20 million of debtor-in-possession financing provided by the Tacit-led group, Greenblatt said in court. The parties are also in discussion about a new budget for the chain, she said.
After months of negotiations, “we’re on solid footing. But we have a little bit of wood to chop,” Scott Greenberg of law firm Gibson Dunn & Crutcher said on behalf of the Tacit lender group.
Judge Sontchi expressed some concern over a proposed 30-day sale timeline, noting that Town Sports’ business hasn’t been widely shopped to potential buyers. He approved the company’s request to access cash on an interim basis. A final financing agreement with the lenders is expected around Friday, the attorneys said.
The case is Town Sports International LLC, 20-12168, U.S. Bankruptcy Court, District of Delaware. To view the docket on Bloomberg Law, click here.
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