24 Hour Fitness Worldwide, Inc. – Files Plan Voting Results in Anticipation of Plan Confirmation Hearing Now Set for December 21st

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December 17, 2020 – In anticipation of their December 21st Plan confirmation hearing (delayed from December 18th), the Debtors have filed (i) their memorandum of law in support of Plan confirmation (the “Memorandum”) [Docket No. 1459] and (ii) Plan voting results [Docket No. 1462].

Plan Overview

The Memorandum [Docket No. 1459] states, “The Debtors commenced these chapter 11 cases in June 2020 amidst a global pandemic that had quite literally grounded their operations to a halt. For reference, these operations include hundreds of club locations, thousands of vendors and business partners, tens of thousands of employees, millions of club members and approximately $1.4 billion of prepetition debt. In response to the unprecedented challenges arising from COVID-19, the Debtors rigorously scrutinized nearly every aspect of their business, and responded accordingly, to preserve value and, most fundamentally, their ability to operate, grow, and thrive as a going concern for the benefit of their members and their thousands of employees. These efforts have succeeded, and the Debtors now present their Plan for confirmation by the Bankruptcy Court.

The Plan itself represents months of tireless, good-faith efforts by the Debtors, the Creditors’ Committee, the Ad Hoc Group, the Debtors’ key business partners, and their respective advisors to achieve the objectives of chapter 11—facilitating a business’ reorganization as a going concern, while also maximizing value for stakeholders. These objectives are achieved through the Plan now before the Bankruptcy Court.”

On the topic of outstanding objections, the Memorandum notes: "To date, the Debtors have received approximately seventeen (17) objections (collectively, the ‘Objections’) to Plan confirmation. The Debtors have worked hard to narrow the issues and, where possible, resolve concerns raised by the objecting parties. At present, the Debtors expect to resolve sixteen (16) Objections prior to Monday’s confirmation hearing….The Debtors also received a number of objections to the Debtors’ assumption or assumption and assignment of executory contracts and unexpired leases (collectively, the ‘Contract Objections’). The Debtors are continuing to work to resolve the Contract Objections….To the extent not otherwise resolved prior to the Confirmation Hearing, such Contract Objections shall be adjourned and set for a further hearing in accordance with Article V.D of the Plan."

The following is a summary of classes, claims, voting rights and expected recoveries showing highlighted changes (defined terms are in the Plan and/or Disclosure Statement):

NB: Recoveries are based on a total enterprise value of approximately $538.0mn for the Debtors, together with their non-debtor affiliates. 

  • Class 1 (“Priority Non-Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is 100%.
  • Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is 100%.
  • Class 3 (“Prepetition Credit Facility Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $690,784,861.41 and the estimated recovery is 2.5%. Each Holder shall receive, pursuant to the Restructuring Transactions, its Pro Rata share of 5.0% 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.
  • Class 4 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $900,000,000 and the estimated recovery is 0.1%-1.0%. Each Holder of a General Unsecured Claim shall receive, without regard to the particular Debtor against which such Claim is Allowed:
  1. with respect to each General Unsecured Claim that (i) is Allowed in an amount less than or equal to $250,000 or (ii) is held by an Ineligible GUC Holder and is Allowed in amount greater than $250,000 but less than or equal to $400,000, Cash in an amount equal to 1% of the amount of such Allowed General Unsecured Claim, to be funded from the General Unsecured Claim Recovery Cash Pool (the “GUC Cash Recovery”); and
  2. with respect to each General Unsecured Claim that (i) is held by an Eligible GUC Holder and is Allowed in an amount greater than $250,000 but less than or equal to $400,000 or (ii) is Allowed in an amount greater than $400,000, its Pro Rata share of the Warrants; provided, that, if the number of Holders receiving Warrants will exceed 1,500, then the Debtors reserve the right to provide the GUC Cash Recovery (in lieu of its Pro Rata share of Warrants) to Eligible GUC Holders that hold General Unsecured Claims that are Allowed in an amount greater than $250,000 but less than or equal to $400,000 on account of such Claims, beginning with the Holder of the General Unsecured Claim Allowed in the smallest aggregate amount, such that the number of Holders that will receive Warrants does not exceed 1,500.

FN: The value of the Warrants has been estimated using a Black-Scholes valuation model to be $0.3 million to $2.2 million, with a midpoint of $1.0 million

  • Class 5 (“Membership Agreement Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $13,000,000 and the estimated recovery is 5.0%-6.0%. Each holder shall receive, without regard to the particular Debtor against which such Claim is Allowed:
  1. with respect to each Membership Agreement Claim that is Allowed in amount less than or equal to $250.00, a Gift Card in the amount of $25.00; and
  2. with respect to each Membership Agreement Claim that is Allowed in amount greater than $250.00, a Gift Card in the amount of $50.00.
  • Class 6 (“Intercompany Claims”) is impaired or unimpaired, deemed to reject or deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is N/A.
  • Class 7 (“Section 510(b) Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is 0%.
  • Class 8 (“Intercompany Interests”) is impaired or unimpaired, deemed to reject, or deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is N/A.
  • Class 9 (“Parent Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is 0%.

Voting Results

On December 17, 2020, the Debtors' claims agent notified the Court of the Plan voting results [Docket No. 1462] which were as follows.

  • Class 3 (“Prepetition Credit Facility Claims”): 93 claim holders, representing $300,568,716.54 (100%) in amount and 100% in number, voted in favor of the Plan.
  • Class 4 (“General Unsecured Claims”): 74 claim holders, representing $465,392,527.90 (97.18%) in amount and 81.32% in number, voted in favor of the Plan. 17 claims holders, representing $13,483,870.36 (2.82%) in amount and 18.68% in number, rejected the Plan.
  • Class 5 (“Membership Agreement Claims”): 3534 claim holders, representing $2,740,819.38 (67.84%) in amount and 77.72% in number, voted in favor of the Plan. 1013 claims holders, representing $1,299,403.40 (32.16%) in amount and 22.28% in number, rejected the Plan.

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