The owner of the Boston Sports Clubs chain sought bankruptcy protection from its creditors, unable to keep up with debt payments after the pandemic shut its gyms for months.
Town Sports International LLC filed a Chapter 11 petition in Delaware that estimates liabilities and assets of $500 million to $1 billion each. The move allows the company to keep operating while it works out a plan to pay creditors and turn the business around.
A number of gym chains were struggling with heavy debt loads even before the virus crippled the global economy and sent the fitness industry reeling. Gold’s Gym International Inc. sought court protection from its creditors in May. 24 Hour Fitness Worldwide Inc. filed for bankruptcy in June.
With a loan coming due in November, Town Sports warned in March that there was doubt about its survival, and said in a filing earlier this month that shareholders could be wiped out. It operates the New York, Boston, Philadelphia and Washington Sports Clubs.
By April, management led by Chairman and Chief Executive Officer Patrick Walsh was weighing bankruptcy. The court process allows the company to reject or renegotiate its leases to save on rent, and Town Sports could close some gyms permanently depending on the outcome of talks with its creditors. Before the pandemic, Town Sports said it had about 9,200 employees, with 1,900 working full-time.
The filing comes after talks collapsed over financing that would have helped the chain weather the Covid-19 pandemic. With more than 180 locations mostly in the Northeast U.S., Town Sports has begun slowly re-opening some gyms under state and federal guidelines.
New York Governor Andrew Cuomo is letting gyms in the state resume operations, but with capacity limited to 33%. Customers and staff must wear masks at all times, and fitness centers must meet strict health and air-ventilation guidelines.
Town Sports previously was looking for a financial reprieve through a deal to buy the indoor cycling studio business of Flywheel Sports, which was owned by investment firm Kennedy Lewis.
The fitness chain, which has around 600,000 members, wanted to use part of the financing from Flywheel’s owners to replace its loan due in November. But the plans fell apart, and the loan has been trading for around 16 cents on the dollar, according to Bloomberg data.
New York Sports Clubs began operations as a cluster of squash clubs in the 1970s before introducing exercise classes and expanding up and down the U.S. East Coast.
The case is Town Sports International LLC, 20-12168, U.S. Bankruptcy Court, District of Delaware.
— to www.bostonglobe.com