Add 24 Hour Fitness Worldwide, the well known gym, to the list of companies considering a bankruptcy filing. That’s the familiar “people familiar with the matter” are divulging. Moreover, Moody’s has downgraded the company and its debt ratings; the gyms are still closed and 24 Hour Fitness has only $1mn in cash. Frankly, Chapter 11 seems inevitable. In fact, looking back to our initial post on the company’s troubles in November 2019, we were projecting Chapter 11 back then, way before Covid-19 came along. The company is on our “Weakest Links” list.
For Barings BDC (BBDC) – the only BDC with exposure – the likely loss will be 70 cents or more on the dollar on the $4.7mn invested at cost in the company back in IIIQ 2018, or ($3.3mn). At that time, 24 Hour Fitness seemed a safe bet, as reflected in pricing of LIBOR + 350bps, and for which BBDC paid a premium.
We wouldn’t be surprised if the company actually pulls the trigger this week as there does not seem to be any support coming from either the government, its lenders or moneyed sponsor AEA Investors, whose slogan is “Relationships Matter”. Until they don’t.