Fitness World and sports club has laid off nearly entire staff
Hayley Woodin
Western Investor
The company behind Steve Nash Fitness World and Sports Clubs (SNFW), which owes more than $35 million to creditors, has put the business up for sale.
Under protection from its creditors, the company plans to seek out prospective purchasers and investors for its chain of more than 27 fitness locations.
SNFW Fitness B.C. Ltd. sought creditor protection on April 3, owing more than $35 million to creditors.
According to an initial report from trustee The Bowra Group Inc., SNFW Fitness board directors have determined the company is not a viable business without a significant equity injection.
Directors estimate more than $10 million would be needed to cover the company’s costs and estimated losses until the COVID-19 lockdown ends, excluding rent and lease obligations, and assuming government restrictions are lifted in August. That is in addition to $32 million owing to the Bank of Montreal, a secured creditor, and approximately $3.4 million owing to unsecured creditors.
SNFW Fitness also owes around $1.5 million to landlords on 32 leased locations for rent due in April. None of them were paid.
“We’re going into this fully intending to have [a sale],” explained Mario Mainella, a licensed insolvency trustee with The Bowra Group. He added that even with an extension, the sales process will take place in a short timeframe.
“The cash burn rate is quite high and the bank’s going to have to fund that,” Mainella told BIV.
“What this whole process is trying to do is maximize the positive impact in terms of recovery to creditors, a landlord having a tenant, employees having the opportunity of going back to work and members having their membership and whatnot honoured by prospective purchasers.”
SNFW Fitness had 30 days to file a proposal to creditors or ask for an extension after filing a notice of intention to file a proposal on April 3. Had the company done neither by May 3, it would have automatically been deemed bankrupt, and SNFW Fitness is not in a position to may a proposal to its creditors in less than two weeks, according to the trustee.
The Bowra Group’s first report states SNFW Fitness has engaged MNP Corporate Finance Inc. through the trustee to start a tender bid sales process. The deadline for offers will be May 20, subject to court approval of the sales process, with a sales agreement executed by May 28.
At present, court documents list creditors who are owed $250 or more. The list excludes landlords, and Mainella says discussions are ongoing with all landlords to negotiate rent relief.
Amounts owing to employees – such as severance – or to customers who pre-paid for memberships have not yet been accounted for, but Mainella confirmed that amendments will have to be made to reflect what may be owed to both groups.
“If there is a purchaser at the end of this, which we believe there will be, they will likely work with the customers in order to honour what was paid – we hope. That is up to them, but that would make smart business sense.”
The trustee’s report, submitted this week, confirms that SNFW Fitness has laid off all its staff except for six key personnel. The company normally employs around 1,300 individuals. Former employees have told BIV that they have not received severance.
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