Creditors of gym chain Fitness First have approved proposals for a Company Voluntary Arrangement (CVA).
The deal – negotiated by KPMG – will see the leases of the company’s property portfolio restructured with immediate effect.
Richard Fleming, UK head of restructuring at KPMG and supervisor of the CVA, said today’s vote in favour of the CVA proposal addresses Fitness First’s operational issues around its property portfolio.
He added: “(It) will enable the wider financial restructuring and injection of fresh capital to take place. We needed over 75 per cent all creditors to approve but, as with all CVAs, we also needed over 50 per cent of unconnected creditors to approve.
“We are pleased that the majority of landlords, who were the largest unconnected group of unsecured creditors, voted in favour of the CVA.
Fleming explained that a company can only propose a CVA when the alternative is administration and it must offer a better return to creditors.
He said: “The Fitness First CVA is estimated to generate a return of 25-35p in the £1 for the landlords, versus less than 1p in the £1 in an administration.
“In this way, both the creditors and the company are able to fix an underlying business issue without going through a full trading administration; good news for Fitness First’s creditors and good news for customers and employees.”
Brian Green, restructuring partner at KPMG – also a supervisor of the CVA – added: “As we have sought to develop company voluntary arrangement models, we have worked with creditors to find workable compromise agreements.
“In the case of Fitness First, our conversations with landlords – the relevant constituent group of creditors asked to accept a change to lease agreements – were particularly supportive of the continued payment of rates and the availability of a clawback mechanism to ensure they share in the business’ fortunes.
“With the support of its key creditors, Fitness First has been able to find a way to avoid administration.”