Reuters: Private Equity: RLPC-Fitness First sells gyms as part of debt overhaul

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RLPC-Fitness First sells gyms as part of debt overhaul Jun 1st 2012, 14:57 By Claire Ruckin LONDON, June 1 | Fri Jun 1, 2012 10:57am EDT LONDON, June 1 (Reuters) - UK gym chain Fitness First has put around half of its UK gyms up for sale as part of a wider restructuring plan in a bid to avoid going into administration, the company said on Friday. Fitness First is selling 67 gyms and will renegotiate rents with its landlords on some of the 80 gyms it is keeping as current rent commitments are unsustainable for the company, which has struggled in tough economic conditions as consumers cut discretionary spending. Fitness First is seeking to carry out this process through a Company Voluntary Arrangement (CVA) which lets a company with debt problems reach a voluntary agreement with its business creditors over the repayment of that debt. KPMG, which is administering the CVA, referred to it as a vital lifeline to avoid administration and said it should always offer a better return to creditors. It estimated around 23 to 28 pence in the pound will be given to compromised landlords via the CVA compared to less than 0.5 pence if an administration went ahead. Seventy-five percent of creditors have to approve the CVA in order for the sale process and rent negotiations to go ahead. The company's wider financial restructuring is also dependant on the CVA being approved. Under the wider restructuring, lenders which include distressed investment funds Marathon and Oaktree Capital, agreed to wipe out 600 million pounds of debt in return for a 75 percent equity stake. The remaining 25 percent of equity will be held by parties willing to provide a new 100 million pound credit facility, underwritten by Marathon and Oaktree. BC Partners bought Fitness First in 2005 for 1.2 billion euros. It tried to float its Australian and Asian operations in Singapore in 2011 but pulled the process due to market volatility. BC Partners will also receive a small upside in the company's equity by receiving warrants to buy shares. Link this Share this Digg this Email Reprints

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