"If it were not for COVID-19 and its devastating effects, we would not be filing for Chapter 11. With that said, we intend to use the process to strengthen the future of 24 Hour Fitness for our team and club members, as well as our stakeholders," Chief Executive Officer Tony Ueber said in a statement.
Once approved in court, the company expects to secure approximately $250 million in debtor-in-possession (DIP) financing, which along with its cash from operations, will allow 24 Hour Fitness to continue operations and reopen its remaining clubs.
24 Hour Fitness, an industry leader for more than 30 years, said Sunday it's permanently closing more than 130 clubs.
Its remaining some 300 locations are expected to reopen by the end of June according to state and local public health agency guidelines. The company has also altered its club experience to include a new workout reservation system, touch-free club check-in and stringent cleaning and social distancing protocols.
"We expect to have substantial financing with a path to restructuring our balance sheet and operations to ensure a resilient future," Ueber continued. "The COVID-19 environment has proved that attention to health and fitness are more important now than ever before."
"As a result of this restructuring, we will gain financial strength and flexibility to accelerate our business transformation plan, which includes reinvestment in our existing clubs, opening new clubs and introducing several new innovative products and services that will enhance the fitness experience for our club members and guests for many years to come."
Financial services company Moody's had already downgraded 24 Hour Fitness' status in December 2019 before the onset of the pandemic, citing "a sizable decline in membership count and an acceleration in comparable club revenue declines in the third quarter."
Experts expect a dramatic shift in the U.S. fitness industry even after coronavirus restrictions are lifted, as many Americans have become accustomed to at-home, online workout options since gyms remained shuttered for months under stay-at-home orders.
A consumer survey by Harrison Co., conducted in April 2020 of approximately 1,000 fitness club users reflected that that $10 billion annually could leave the fitness club sector, much of it for home fitness options, reflecting changing consumer sentiment surrounding health club safety and cleanliness.
"The difficult economic circumstances currently faced by gyms and health clubs will not disappear once the crisis ends,” Paul Byrne, a partner at Harrison Co, said in a statement. “Once stay-at-home guidelines are lifted, consumers will continue to work out at home in numbers far beyond anything we saw prior to the crisis."