California Fitness Chain Explores Options to Ease Debt After Virus Shuts Gyms

(Bloomberg) -- In-Shape Health Clubs is exploring strategic options including a debt restructuring, raising capital or a potential sale as the Covid-19 pandemic continues to wreak havoc on gym operators, according to people with knowledge of the matter.

The California fitness chain, which laid off the majority of its employees in March, is working with an adviser as it considers alternatives after the coronavirus caused it to shut more than 60 locations, said one of the people. They asked not to be identified because the talks are private.

The company, which has been reopening some of its fitness centers, has been owned since 2013 by Fremont Private Holdings, an arm of the San Francisco-based private investment office for the Bechtel family, and Pulse Equity Partners LLC.

Representatives for In-Shape and Pulse declined to comment, while a Fremont representative didn't immediately respond to a request for comment.

Starved of revenue amid government restrictions intended to fight the pandemic, U.S. fitness chains have fallen into distress. Several have filed for bankruptcy, including 24 Hour Fitness Worldwide, Gold's Gym International and Town Sports International LLC, the owner of the New York Sports Clubs and Lucille Roberts.

Debt Pile

In-Shape has about $70 million in debt, split across a $17 million revolving credit facility and a $53 million first-lien term loan, according to data compiled by Bloomberg.

The company traces its roots to 1981, when a single racquetball club in Stockton, California, was turned into a full-service health club. Before the pandemic, the chain had grown to more than 60 clubs in California, offering swimming, tennis, basketball and other activities, according to the company's website.

Earlier this month, the California Fitness Alliance -- which In-Shape is part of -- said it filed legal action in Los Angeles County Superior Court seeking to restore “reasonable” access to indoor fitness, citing benefits to physical and mental health.

“We created strict guidelines to ensure public safety when exercising indoors, so Californians could receive the health benefits associated with exercise and help expand the fight against Covid-19,” Francesca Schuler, Chief Executive Officer of In-Shape Health Clubs, said at the time. “When the state briefly reopened, these protocols worked.”

Schuler cited a CFA study showing that of the more than 5.5 million members who checked into 785 fitness centers between June 12 and July 13, only 0.002% tested positive for the virus, with no cases reported as a result from visits to fitness centers.

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