24 Hour Fitness files plan of reorganization, disclosure statement

By Sarah Lizee

Olympia, Wash., Oct. 8 – 24 Hour Fitness Worldwide, Inc. filed a Chapter 11 plan of reorganization and related disclosure statement on Wednesday in the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the company announced that it has entered into a restructuring support agreement with lenders beneficially holding about 73% of the company’s secured debt and about 65% of its senior unsecured notes on the terms of a comprehensive restructuring plan.

The financial restructuring will reduce about $1.2 billion of funded debt, provide increased financial flexibility to help navigate through the Covid-19 pandemic and better position 24 Hour Fitness for long-term success, the company said.

In addition, the plan calls for a new money rights offering under which eligible holders of allowed debtor-in-possession claims will be distributed subscription rights to purchase 48,165,893 shares of new preferred equity interests issued by the reorganized parent. The rights offering shares issuable under the plan will have an aggregate investment amount of $65 million.

Upon emergence from Chapter 11, the debtors will enter into a senior secured term loan facility in an aggregate initial principal amount of up to $200 million and an incremental uncommitted facility of up to $200 million.

Holders of priority non-tax claims will be paid in full in cash or have their claims reinstated.

Holders of other secured claims will receive payment in full in cash the collateral securing their claims or reinstatement of their claims.

Holders of prepetition credit facility claims will receive their pro rata share of 5% of the new common equity interests, subject to dilution by the dip backstop equity issuance, the warrants, the management incentive plan and the conversion, if any, of new preferred equity interests into new common equity interests.

Holders of general unsecured claims will receive their pro rata share of warrants.

Intercompany claims will be adjusted, continued, settled, reinstated, discharged or eliminated in a tax-efficient manner as determined by the debtors or the reorganized company, but in no event paid in cash.

Section 510(b) claims will be cancelled with no distribution.

Intercompany interests will be cancelled, reinstated or receive other tax-efficient treatment determined by the debtors or the reorganized company.

Parent equity interests will be cancelled with no distribution.

The debtors are seeking to schedule a hearing on approval of the disclosure statement on Nov. 12 and a plan confirmation hearing on Dec. 18.

24 Hour Fitness is a San Ramon, Calif.-based fitness-club operator. The company filed bankruptcy on June 15 under Chapter 11 case number 20-11558.

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