New York Sports Clubs’ owner files for bankruptcy after forced gym closures

The owner of New York Sports Clubs filed bankruptcy on Monday and plans to sell itself — and gym rats are fuming.

Town Sports International — which also operates gyms in Boston, Philadelphia and Washington, DC, as well as Lucille Roberts and Total Women Gym and Spa — said in a filing that the coronavirus pandemic “wreaked havoc” on its operations as it filed for Chapter 11 with the US Bankruptcy Court in Delaware.

Town Sports said two separate groups of its lenders have expressed interest in buying the Elmsford, New York-based company as a going concern and offering debtor-in-possession financing to help it restructure.

That news had some of the chain’s customers wondering where their membership fees went, claiming that the company has been charging them monthly despite the fact that many of its gyms have been closed.

“I was billed in April. And again in September. And can’t get through to a human being on the phone to cancel or pause my membership,” customer Corrie Slewett griped on Twitter.

“Good riddance,” tweeted another user. “This was the same company that continued to bill customers for months while gyms were closed.”

Town Sports plans to emerge as an “even stronger company, better positioned to serve members into the future,” it said in a statement while also adding that it’s “deeply grateful” for its customers’ “continued loyalty.”

It’s the latter that Town Sports will need to work on, say industry experts.

“What we’ve learned in the last six months is the convenience of working out at home or wherever you are,” said Joe Favorito, a sports media consultant and professor at Columbia University. “People can choose an individual workout and it’s not a recurring charge like a gym membership that you pay for regardless of whether you go to the gym or not.”

Town Sports said it preferred a proposal from Kennedy Lewis Investment Management, its largest secured debtholder, including the possible assumption of 94 leases, to a proposal from private equity firm Tacit Capital and other lenders involving fewer leases.

As of March 31, Town Sports operated 185 fitness centers, including 99 New York Sports Clubs, with about 580,000 members.
Assets and liabilities totaled between $500 million and $1 billion.

Gold’s Gym filed for bankruptcy protection in May, followed by 24 Hour Fitness Worldwide in June.

Town Sports was started as a small chain of squash clubs in New York City in 1973.

The company said it employed about 9,200 people, of whom 7,300 worked part-time, when it terminated all non-executive employees in March. It said it has reopened about 95 locations.

With Reuters