80.3 F
San Fernando
Friday, May 27, 2022

Sports Club Stronger After Exiting Chapter 11?

Although Total Woman has grand plans, another Valley chain is an example of the challenges in the gym business. Meridian Sports Clubs LLC, the North Hills operator of the Bodies in Motion chain, was purchased out of bankruptcy last month by its chief lender, New York private equity firm Praesidian Capital. High lease costs led the company to default on its debts, and eventually to the bankruptcy filing in October. But even with all those troubles, Jason Drattellin, founder and managing partner of Praesidian, wants to rebuild the chain. “We are excited about the opportunities the new Meridian presents, particularly as we invest new money into facilities to ensure they meet the high standards our clients both expect and anticipate,” he said, in a prepared statement. Meridian exited Chapter 11 earlier this month, with Praesidian exchanging its debt for equity. The debts included a $7.5 million term loan and a $4.5 million revolving credit facility, both from Praesidian, which in 2009 had injected $10 million of equity into the chain. Jeffrey Dulberg, an attorney at the L.A. office of Pachulski Stang Ziehl & Jones LLP, represented Meridian in the bankruptcy. He said the company’s fall was almost entirely a real estate issue due to pricey leases, and that the bankruptcy was a way to “right” the company. “For Meridian as an operating entity, it’s positioned better than it has been in a couple years. Its balance sheet is clean,” he said. Bodies in Motion has developed a reputation over the last decade for its fitness classes. While it offers some of the weightlifting and cardio equipment found at most gyms, it drew members interested in kickboxing, yoga, dance and cycling classes. But as competing chains added such classes, membership sunk. The chain, which once had a strong Valley presence, has closed its Encino outlet and last month sold one in Northridge to International Fitness of Eugene, Ore., which operates four gyms in its home state but is looking to expand. Currently, Bodies in Motion operates nine clubs in California, Nevada and Hawaii. Among the remaining outlets, three are branded as David Barton Gyms, including two in Los Angeles. Lloyd Greif, chief executive at L.A. investment bank Greif & Co., said gyms are an attractive business because they generate cash. But the industry is challenged due to high turnover and attrition of patrons, who view membership as discretionary. He thinks Praesidian could have purchased the company merely in an effort to delay the inevitable, and fold it later. “They undertook that financing in 2009 to strengthen the brand, but it just didn’t work,” he said. “They may keep the business alive on fumes and take the hit later.” But Marshal Cohen, chief sports industry analyst at Port Washington, N.Y. market research firm NPD Group Inc., said the private equity firm could reposition the chain for sale. “They may just look to reinvent it, re-tool it, build it up a bit and sell it off,” he said. “The best thing about the health club business is that it’s always able to get a facelift.” – Elliot Golan

Featured Articles

Related Articles