Embattled gym chain Town Sports International and 161 of its affiliated companies — a list comprised almost exclusively of its New York, Boston, Philadelphia and Washington Sports Club locations — filed for bankruptcy protection on Sept. 14.
TSI follows Gold’s Gym and 24 Hour Fitness in seeking relief in bankruptcy court as the pandemic continues to rock the fitness industry. The chain listed its estimated liabilities between $500 million to $1 billion.
“Town Sports International is not going out of business,” the company said in a statement. “Restructuring is the best way to properly respond to the COVID-19 pandemic, with the long-term goal to emerge as a thriving powerhouse in the fitness industry.”
TSI has or will permanently shutter 22 locations and seeks to modify the lease agreements at 13 other locations, according to court documents. The filing comes after TSI and its affiliates lost $136.3 million per its most recently released quarterly earnings statement from Sept 4. NASDAQ has threatened to de-list the company over failure to promptly file earning reports.
The chain also faces multiple lawsuits over allegations that the gym chain charged members while locations were shuttered in response to COVID-19 and failed to honor member cancelation requests when locations reopened including a federal complaint submitted by D.C. Attorney General Karl A. Racine in August.
TSI estimated it owes about $225,000 “on account of the refunds and chargebacks.”
“The debtors [TSI and its affiliates] believe that the increase in customer loyalty generated by the refunds and chargebacks far outweighs the costs thereof,” TSI said in motion. “Accordingly, the debtors seek authority to continue to issue refunds and chargebacks, in their discretion, in the ordinary course of business.”
In other motions that accompanied the initial bankruptcy filing, TSI asked for court approval to pay employee wages, insurance premiums and utilities.
The top 30 creditors listed in the bankruptcy filing were all related to rent at various locations with an average of nearly $800,000 per claim.