Law360 (October 15, 2020, 11:32 AM EDT) -- Yoga instruction company YogaWorks filed for Chapter 11 protection in Delaware and is seeking an asset sale after pandemic-related restrictions led it to close its physical studio locations.
YogaWorks Inc. and a California affiliate reported between $1 million and $10 million in assets and between $10 million and $50 million in debt in their Wednesday court filing. The California-headquartered company said it already has a stalking horse bidder for the auction: Serene Investment Management LLC, a private investment firm focusing on lower middle market deals and special situations.
YogaWorks said it will continue operations over its livestream and digital platforms, YogaWorks Live and MyYogaWorks. All of its in-person studios are closing because of the pandemic, the company said in an accompanying announcement Wednesday.
"The COVID-19 pandemic has created unprecedented challenges for our industry and business, including mandatory studio closures and social distancing-imposed attendance restrictions even where studios have been permitted to reopen," CEO Brian Cooper said in a statement Wednesday.
"With the improved financial flexibility provided through this [restructuring] process, we will continue to build upon the strengths of our digital and educational platforms, both of which have proven to be successful and have experienced significant growth over the course of the past several months," Cooper said.
Before the pandemic hit, YogaWorks operated over 60 studio locations in a range of states including California, New York, Texas and Georgia, Cooper said Thursday in first-day declarations to the court.
The company had struggled financially in recent years and explored a sale last year, the declarations said.
For the current sale process, YogaWorks is seeking a mid-November auction and is hoping to close the sale by the end of November, court filings show. The company on Thursday also asked the court to approve a $3.35 million debtor-in-possession credit facility for working capital and to help it fund the Chapter 11 case.
The company reported that its largest unsecured claim is a $1 million court judgment. The judgment settles a labor suit brought by a former teacher at the studio on behalf of a proposed class of instructors and employees, according to court filings from the case.
YogaWorks also owes nearly $290,000 to Latham & Watkins LLP and about $187,000 to Jackson Lewis PC, the petition said. Jackson Lewis served as YogaWorks' counsel in the wage suit and Latham represented the company in a now-dismissed suit over YogaWorks' initial public offering disclosures, court filings show.
Representatives for YogaWorks did not comment beyond the company's public filings. Representatives for Serene did not immediately respond to requests for further comment Thursday.
YogaWorks is represented by Thomas J. Francella Jr. of Cozen O'Connor and by Alan J. Friedman and Melissa Davis Lowe of Shulman Bastian Friedman & Bui LLP.
The case is In re: YogaWorks Inc., case number 20-12599, in the U.S. Bankruptcy Court for the District of Delaware.
--Additional reporting by Craig Clough. Editing by Alyssa Miller.
Update: This story has been updated with details from the company's first-day declarations, a response from YogaWorks and with counsel information for the parties.
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