Gym chain 24 Hour Fitness reportedly is working with advisors at Lazard and Weil, Gotshal & Manges to weigh options including a bankruptcy that could come as soon as the next few months.
The chain is grappling with a heavy debt load, deteriorating performance and a coronavirus pandemic that forced it to shut all 448 clubs, people familiar with the matter tell CNBC.
The people, who requested anonymity because the information is confidential, cautioned that bankruptcy is not definite, and may still be avoided, CNBC said.
24 Hour Fitness isn't alone as the coronavirus-sparked shutdowns ravage the fitness industry.
Even before the virus shuttered the global economy, a number of gym chains were struggling with onerous debt loads. With no certainty on when they’ll be able to reopen or whether they’ll have access to additional government aid, those troubles have been exacerbated.
For example, the owner of the New York Sports Clubs chain is considering a bankruptcy filing as gyms across the country remain closed to stop the spread of coronavirus.
Town Sports International Holdings Inc. has been in talks with advisers and lenders to get ahead of its nearly $200 million loan maturity in November, people with knowledge of the matter told Bloomberg. It’s weighing a Chapter 11 filing as it seeks financial support from creditors, but the talks could also result in an out-of-court solution, the people said.
Meanwhile, Peloton and other home “smart bike” makers are experiencing a sharp increase in sales as a result of the COVID-19 pandemic. The machines, which allow riders to stream live spinning classes or compete with other users in immersive digital environments, are in sudden demand now that much of America can’t get to the gym.
The temporary bump is much-needed in an industry that has long suffered from intractable obstacles: the core product is an expensive one-time purchase, the number of potential consumers are limited, the market is saturated and competitors are seemingly more interested in exchanging lawsuits than broadening their customer bases.
Recently, however, business is booming. “Our sales are up ten-fold,” said Lou Lentine, chief executive of Chattanooga, Tennessee-based Echelon, told Bloomberg. “We did more sales in the last three days than we expected to do in a month.” The company, which offers a $839 entry level home smart bike, is currently working to ramp up production.
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