24 Hour Fitness statement draws objection from unsecured creditors

By Sarah Lizee

Olympia, Wash., Nov. 5 – 24 Hour Fitness Worldwide, Inc.’s disclosure statement drew an objection Wednesday from the official committee of unsecured creditors, according to a filing in the U.S. Bankruptcy Court for the District of Delaware.

“The plan is premised on an artificially low valuation, a lucrative rights offering, and a new money exit financing package, each structured to deliver outsized returns to the DIP lenders without a proper market test,” the committee said in the objection.

The committee said it is prepared to submit evidence at the confirmation hearing that the debtors’ businesses are far more valuable than the debtors conclude and, therefore, that the plan is unconfirmable.

“While the debtors’ DIP lenders are poised to recover a multiple of the value of their claims, the debtors’ unsecured creditors are left with a pro rata share of warrants to purchase 8% of the reorganized debtors’ common stock, unprotected from the massive dilution from the new preferred equity interests and management incentive plan, and exercisable only at a strike price equal to the excess of total enterprise value of $1.2 billion,” the committee added.

“This formula all but ensures general unsecured creditors will recover nothing under the plan.”

24 Hour Fitness is a San Ramon, Calif.-based fitness club operator. The company filed bankruptcy on June 15 under Chapter 11 case number 20-11558.

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