- June 3, 2012
The owner of a Brighton gym has put forward a financial rescue package to its creditors.
Fitness First, which has a gym in Queen’s Road, near Brighton railway station, proposed a company voluntary arrangement (CVA) on Friday (1 June).
Under the arrangement all the company’s gyms will remain open and a specialist from the accountancy KPMG, Richard Fleming, will supervise matters.
Several of the company’s landlords are being asked to accept reduced rents or monthly payment instead of quarterly and 67 gyms are expected to be sold to rival operators.
Fitness First is expected to keep paying business rates while the deal is negotiated.
Mr Fleming said: “The CVA proposed by Fitness First gives the company a vital lifeline to avoid administration by renegotiating the lease terms of its property portfolio.
“In order for a CVA to be proposed, the company must be facing administration – it cannot be used simply to duck onerous leases.
“And the CVA must always offer a better return to creditors than an administration.
“In the case of Fitness First, we estimate the return to compromised landlords to be within a range of 23p to 28p in the £1 versus less than 0.5p in the £1 in administration.
“Importantly the CVA is part of a wider restructuring of the company, involving the transfer of the equity to the debt holders and injection of a new £100 million loan facility from the lenders.
“The wider financial restructuring is dependent on the approval of the CVA by the creditors.”
Creditors are due to vote on the deal on Wednesday 20 June.
Brian Green, a KPMG restructuring partner and the second proposed supervisor of the CVA, said: “CVAs have inspired controversy in the past – understandably from the creditors who are compromised.
“But it is important to stress that the CVA can only take effect with the consent of 75 per cent of creditors.
“The creditors will fare better in a CVA than they would do in an administration.
“We believe CVAs are an important tool in an insolvency practitioner’s kit and give companies an option of last resort before the appointment of administrators, which can be more expensive and disruptive to operations, protecting more of the business and jobs.”
Mr Fleming and Mr Green have also been appointed administrators of Fitness First for Women, a subsidiary company
The subsidiary does not trade but holds a number of leases including two Fitness First gyms.