In-Shape Holdings asks bankruptcy court to dismiss Chapter 11 cases

By Sarah Lizee

Olympia, Wash., June 7 – In-Shape Holdings, LLC asked the U.S. Bankruptcy Court for the District of Delaware to dismiss the debtors’ Chapter 11 bankruptcy cases, according to a motion filed Monday.

In-Shape initiated the cases to maximize value for stakeholders by selling its assets on a going concern basis. The sale preserved hundreds of jobs and maintained a health club business on which vendors, landlords and customers can continue to depend, the company said.

The purchaser of the company’s assets is an affiliate of the debtors’ pre-petition secured lenders and lenders under the debtor-in-possession facility, as previously reported. The purchase price included a credit bid of the debt under the DIP facility and $25 million of pre-petition secured debt, as well as a cash payment of $250,000.

“While the purchase price is sufficient to satisfy the anticipated administrative expenses of these Chapter 11 cases and the debtors’ obligations under the $11.5 million DIP facility, it is a far cry from covering the $65 million owed to the pre-petition secured lenders,” the company said in its motion.

The small cash component of the sale price is being used to pay for the administration of the debtors’ wind down.

In-Shape said that while the debtors, official committee of unsecured creditors, pre-petition secured lenders and DIP lenders explored various options to bring the Chapter 11 cases to a close, ultimately, they all determined that dismissal is the most expeditious and cost-effective mechanism to wind down the debtors’ affairs.

The company said the dismissal will not negatively impact creditors, as compared to a Chapter 11 plan or conversion to Chapter 7, because there are no remaining unencumbered assets of any value available for distribution to unsecured creditors and insufficient funds to support the administrative costs of pursuing anything but a prompt exit from bankruptcy.

In-Shape is a Stockton, Calif.-based health club operator. The company filed bankruptcy on Dec. 16 under Chapter 11 case number 20-13130.

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