24 Hour Fitness Worldwide, Inc. – Files Proposed $200mn Exit Facility Documentation

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December 5, 2020 –The Debtors filed a Plan Supplement which attached, inter alia, documentation relating to the Debtors' proposed $200.0mn exit facility [Docket No. 1301]. The “Exit Facility Agreement” is attached to the Plan Supplement at Exhibit B.

Terms of Exit Facility Credit Agreement:

  • Borrower: 24 Hour Fitness Worldwide, Inc.
  • Administrative and Collateral Agent: Wilmington Trust, National Association
  • Commitment: A Term Commitment of $200,000,000.
  • Date and Location: Included in December 5, 2020 Plan Supplement [Docket No. 1301 Exhibit B]
  • Interest Rate: Base Rate plus 4.00% per annum for Base Rate Loans and the Eurocurrency Rate plus 5.00% per annum for Eurocurrency Rate Loans; provided that (A) at any time upon the occurrence of the Cash Interest Step Up Trigger, the Applicable Rate shall automatically convert to 5.00% per annum for Base Rate Loans and 6.00% per annum for Eurocurrency Rate Loans and (B) at any time upon occurrence of the Cash Interest Step Down Trigger following the occurrence of the Cash Interest Step Up Trigger, such rate shall automatically convert back to 4.00% per annum for Base Rate Loans and 5.00% per annum for Eurocurrency Rate Loans until the occurrence of the Cash Interest Step Up Trigger. 
  • Maturity Date: The earliest of the fifth anniversary of the Closing Date, (ii) the date of termination in whole of the Term Commitments pursuant to Section 2.06(a) prior to any Term Borrowing and (iii) the date that the Term Loans are declared due and payable.
  • Fees: The Borrower shall pay to the Administrative Agent and the Collateral Agent for their own respective accounts fees in the amounts and at the times specified in the Fee Letter. The Borrower shall pay to the Lenders and the Administrative Agent and Collateral Agent such other fees as shall have been separately agreed upon in writing in the amounts and at the times so specified.

Plan Background

The First Amended Disclosure Statement [Docket No. 1233] notes, “The transactions contemplated in the Plan will maximize value and allow for the Debtors’ business to reorganize with a substantially reduced debt load and increasing their cash flow on a go-forward basis. Specifically, the proposed restructuring contemplates:

  • a reduction of the Debtors’ funded debt as of the Petition Date of approximately $1.2 billion;
  • a new money rights offering (the “Rights Offering”) pursuant to which eligible holders of Allowed DIP Claims will be distributed subscription rights (the ‘Subscription Rights’) to purchase 48,165,893 shares of New Preferred Equity Interests (as defined herein) issued by the Reorganized Parent (the ‘Rights Offering Shares’). The Rights Offering Shares issuable pursuant to the Plan shall have an aggregate investment amount of $65.0 million; and
  • The Rights Offering Shares issuable pursuant to the Plan shall have an aggregate investment amount of $65.0 million; provided that such investment amount may be increased to up to $80.0 million in the aggregate with the consent of the Requisite Consenting Creditors and
  • upon emergence from chapter 11, entry into a senior secured term loan facility in an aggregate initial principal amount of up to $200.0 million and an incremental uncommitted facility of up to $200.0 million (collectively, the ‘Exit Facility’).

Prepetition Indebtedness

Debt Instrument (Aggregate Principal)

Funded Debt ($ millions)

Prepetition Credit Facility (pari passu)

 

    Revolving Credit Facility

$95.2

    Term Loan Facility

$835.1

Total Secured Debt

$930.3

 

 

Senior Unsecured Notes

$500.0

Total Funded Debt

$1,430.3

About the Debtors

24 Hour Fitness is one of the nation’s leading operators of health and fitness clubs. The Debtors operate out of their two headquarter locations in San Ramon, California, and Carlsbad, California. As of March 31, 2020, the Debtors served approximately 3.4million members in 445 locations across the United States, all of which are leased.

Prior to the March 2020 closure as a result of the COVID-19 pandemic, the Debtors operated in fourteen states and the District of Columbia, with 445 clubs serving approximately 3.4 million members.

Before implementing a reduction in force and a furlough program following the closure of the Debtors’ fitness clubs in connection with the COVID-19 pandemic, the Debtors employed approximately 19,200 individuals. Due to the closure of their clubs in March 2020, the Debtors furloughed approximately 17,800 individuals and reduced their workforce by approximately 700 individuals. After evaluating their go-forward club footprint and implementing certain strategic initiatives, the Debtors further reduced their workforce by approximately 8,300 individuals prior to commencing these chapter 11 cases. As of the Petition Date, the Debtors employ approximately 10,200 individuals, including approximately 8,100 individuals who are employed on a part-time basis.

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