Reuters: Private Equity: RLPC-Funds to take control of Fitness First-sources

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RLPC-Funds to take control of Fitness First-sources Mar 28th 2012, 16:54 By Claire Ruckin LONDON, March 28 | Wed Mar 28, 2012 12:54pm EDT LONDON, March 28 (Reuters) - Distressed investment funds Oaktree Capital and Marathon are set to become the majority shareholders in health club operator Fitness First by swapping their debt for an equity stake in a restructuring of the company's debts of about 600 million pounds, bankers familiar with the matter said on Wednesday. Private equity group BC Partners bought Fitness First in 2005 for 1.2 billion euros. It tried to float the Australian and Asian operations in Singapore in 2011 but pulled the process due to market volatility. Last month the company met its lenders to discuss a first-quarter covenant breach and looming debt maturities after BC Partners failed to sell parts of the business to repay its debt. Distressed investors specialise in buying ailing companies' debt, often pursuing a 'loan to own' strategy with the intention of gaining control of a company in a restructuring. Oaktree and Marathon have been building up a stake in Fitness First and now own more than 75 percent of its debt, banking sources said. Oaktree declined to comment. BC Partners were not immediately available to comment. Traditional lenders are losing confidence in the health club sector, which is suffering in the economic downturn as consumers cut their discretionary spending. "A restructuring of this nature will leave the company with hardly any debt and give it a stronger balance sheet going forward," a banker said. A business plan for a consensual restructuring is due to come out in the next few weeks and Oaktree and Marathon look set to fully equitise their existing debt and underwrite new debt of between 75 million pounds to 100 million pounds, the bankers added. It is unclear if BC Partners will keep a stake in the business. The restructuring is due to wrap up by the end of September. BC Partners hired advisers Rothschild and law firm Dickson Minto. Oaktree and Marathon are being advised by law firm Linklaters while the company itself is being advised by Alix Partners and US law firm Kirkland & Ellis. Link this Share this Digg this Email Reprints

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