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Law360 (September 14, 2020, 11:13 AM EDT) -- The parent company of New York Sports Club filed for Chapter 11 protection in Delaware bankruptcy court Monday, becoming the latest U.S. gym to enter bankruptcy in the face of the COVID-19 pandemic.
New York-based Town Sports International, which operates 185 gyms primarily in the northeastern U.S., said in papers filed with the bankruptcy court that it has more than $500 million in liabilities.
Founded in New York City in 1973, the company currently operates 99 gyms in the U.S. under the New York Sports Club name, along with three in Switzerland. It also operates the Lucille Roberts and Total Woman Gym and Spa chains and locally-branded gyms in Boston, Philadelphia, Washington, D.C., and Palm Beach, Florida.
In a Sept. 4 announcement accompanying the release of its financial results for the first quarter of 2020, the company said it closed all of its gyms on March 22 due to the COVID-19 pandemic and that most of the locations are still closed.
Town Sports posted an operating loss of just under $142.4 million and a net loss of just over $4 million for the first quarter, and it told the Securities and Exchange Commission in its first quarter report that it did not have the funds to pay the $177.3 million it owes on a term loan facility due to mature in November or the amounts owing under its revolving loan facility, which expired last month.
It told the SEC it expects it will need to raise at least $80 million in financing to cover the costs of a Chapter 11 case.
In the SEC report, Town Sports said even where it has been allowed to reopen, it has faced uncertainty over whether a resurgence in cases could lead to a new shutdown or restrictions on its operations, like a New York state rule limiting gyms to one-third of their regular capacity.
"In many cases, state and local governments have not provided a clear timeline for the projected further easing of restrictions, which creates uncertainty for our customers," it said.
Town Sports joins such chains as Gold's Gym — which entered bankruptcy in May — and 24 Hour Fitness — which filed Chapter 11 in June — in seeking bankruptcy protection in the face of prolonged closures of gyms due to the coronavirus pandemic.
The company has retained Houlihan Lokey as its investment banker and financial adviser.
Town Sports is represented by Robert S. Brady, Sean T. Greecher and Jordan E. Sazant of Young Conaway Stargatt & Taylor LLP and Nicole L. Greenblatt, Derek I. Hunter and Mark McKane of Kirkland & Ellis LLP.
The case is In re: Town Sports International LLC et. al., case number 20-12168, in the U.S. Bankruptcy Court for the District of Delaware.
--Editing by Alyssa Miller.
Update: This story has been updated with additional information from SEC filings.
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