Town Sports International may have to file for bankruptcy, it noted in its delayed first quarter 2020 filing on Sept. 4.
The company brought in first quarter 2020 revenue of $98 million compared to $116.6 million in first quarter 2019. It had operating losses of $142 million in the quarter.
As of March 31 when the quarter ended, Town Sports had 185 clubs under various brands, including New York Sports Clubs, Philadelphia Sports Clubs, Boston Sports Clubs, Washington Sports Clubs, Palm Beach Sports Clubs, Lucille Roberts, Christi’s Fitness, Around the Clock Fitness, LIV Fitness, Total Woman Gym + Spa.
Town Sports had been on a purchasing tear for the past three years as CEO Patrick Walsh looked to increase revenue for stockholders of the publicly traded company by added new brands to the mix.
During second quarter 2020 when many of the company’s clubs were forced to temporarily close due to the COVID-19 pandemic, the company permanently closed eight clubs, and it expected to permanently close additional clubs in the third quarter, it said in the quarterly filing.
The company’s strained cash position and current inability to repay all amounts outstanding under its 2013 Term Loan Facility and 2013 Revolving Loan Facility, plus the challenges of COVID-19, led the company to say in the filing that it “may be forced to file a petition for relief under the United States Bankruptcy Code in the near future.”
Town Sports failed to pay outstanding revolver balances that were due Aug. 14. Its 2013 Term Loan Facility is due in its entirety on Nov. 15, 2020. The company does not have sufficient sources of cash to satisfy this obligation on the date of maturity but is working with prospective lenders to refinance it in advance of its maturity date, it said in the filing. If the company cannot obtain refinancing, the remaining $177.78 million principal balance of the loan will become payable on Nov. 15, 2020.
Earlier this year, Town Sports worked on a deal to purchase Flywheel, but it was contingent on the approval of its debt holders, and the deal fell through. That deal was originally set up to help pay down part of Town Sports’ $177.78 million loan due in November and could have delayed the loan’s maturity for another four years.