LA Fitness Taps Lawyers Ahead of Debt Negotiations
LA Fitness Taps Lawyers Ahead of Debt Negotiations
(Bloomberg) -- LA Fitness International LLC and its lenders are working with lawyers in preparation for negotiations as it seeks to ease its roughly $1.7 billion debt load and keep its gyms operating during the pandemic.
The fitness chain is getting advice from law firm Paul Hastings ahead of formal talks with debt holders, according to people with knowledge of the situation. The firm has provided legal support to LA Fitness in the past and is currently assisting with negotiations over a potential amendment to debt documents that would give the gym owner more financial flexibility, said the people, who asked for anonymity discussing a private situation.
LA Fitness is weighing options including a capital raise to help it get through Covid-19 related gym shutdowns, though no formal plans have been made yet, Bloomberg reported Monday. The chain is operating under a forbearance agreement with its lenders that expires Oct. 15.
Robert Wilson, general counsel for LA Fitness, said the company is in active talks with loan agent Bank of America Corp. and is “hopeful that current discussions” regarding the amendment to its credit agreement “will be finalized in short order.” He declined to comment further on ongoing negotiations.
A representative for Paul Hastings didn’t provide comment.
LA Fitness aims to reach a consensual deal and isn’t contemplating filing for bankruptcy at this time, Wilson said, reiterating earlier statements to Bloomberg.
Lenders have organized and are working with restructuring lawyers at Arnold & Porter as well as investment bank PJT Partners, the people said. That group contacted LA Fitness to discuss financing options it could be involved in, they added. Representatives for Arnold & Porter and PJT declined to comment.
The fitness industry is reeling from forced closures to help stem the spread of Covid-19. Town Sports International Holdings Inc., owner of the New York Sports Clubs and Lucille Roberts gyms, went bankrupt earlier this month. Gold’s Gym International Inc. sought court protection from its creditors in May and 24 Hour Fitness Worldwide Inc. filed for bankruptcy in June. New York and New Jersey have allowed fitness centers to reopen at limited capacity, with masks required for customers and staff.
LA Fitness started in 1984 with a single suburban location near Los Angeles, according to the company’s website. It’s backed by founders Louis Welch and Chinyol Yi, along with Seidler Fitness Holdings II LP. Welch continues to serve as the company’s chief executive officer.
The company expanded through acquisitions and organic growth to over 730 clubs in 27 U.S. states and two Canadian provinces, according to Moody’s Investors Service. The chain was already heavily indebted before the pandemic hit and generated around $2.1 billion of revenue for the 12 months through March 31, Moody’s said.
LA Fitness’ $675 million term loan due 2025 was quoted Wednesday around 59 cents on the dollar, according to Bloomberg data.
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