According to Bloomberg, LA Fitness International is considering different plans for how to manage about $1.7 billion of debt in order to keep its clubs operating amidst the pandemic.
Citing people familiar with the matter, Bloomberg reports that the fitness chain is mulling raising new capital and negotiating with lenders to work out an agreement that would help the company navigate the difficult environment it — and many of its competitors in the fitness industry — have endured in recent months.
Facing government-mandated shutdowns, LA Fitness deferred some rent payments, which are scheduled to come due in coming months.
The company is reportedly in talks with advisers from PJT Partners, who are representing lenders in negotiations. LA Fitness general counsel Robert Wilson said the purpose of the talks is “to address the company’s liquidity and its successful emergence from the Covid closures.”
In the 12 months preceding the pandemic in the U.S., the company had generated a reported $2.1 billion, but was also heavily in debt. COVID-related closures in California and Arizona hit LA Fitness particularly hard, as Bloomberg reports that clubs in those states combine for 20 percent of its total revenue.
Bloomberg reports that LA Fitness is currently operating under a forbearance agreement that is set to expire in October. Moody’s Investors Service told Bloomberg that the LA Fitness fully drew on its revolving credit facility during the pandemic, and that its debt relative to earnings is expected to rise and remain high into 2021.