Firms: Ashurst (Fitness First Australia); Kirkland & Ellis (Fitness First on English law); Allens (majority senior lenders on Australian law); Linklaters LLP (majority senior lenders on English law)
Deal: The Fitness First Group’s global restructuring of secured facilities of circa $910 million
Area: Restructuring & insolvency
Value: $910 million
Key players: James Marshall (pictured) led for Ashurst, with assistance from Timothy Sackar and Tim Klineberg (restructuring), Jason Lambeth and Anton Harris (corporate), Andrew Deane (property), Barbara Phair (indirect tax), Paul O’Donnell (direct tax), and Steve Smith and Ken Tang (banking).
Deal significance: The Fitness First Group was significantly distressed and at risk of insolvency across multiple jurisdictions. A restructuring proposal was made by the Group in conjunction with the majority senior lenders. The proposal involved conversion of the $910 million senior secured facilities into an unsecured intercompany loan, the provision of a new £100 million facility to the Fitness First Group and the grant of equity in the group to the senior lenders through a new HoldCo level structure. However, the restructuring proposal was contingent on the group obtaining the support of the minority senior lenders and the group successfully rationalising its global club portfolio.
As a result of a small minority of the senior lenders not agreeing to support the restructuring, an English scheme of arrangement, in conjunction with a contractual mechanism agreed between the majority senior lenders, was required to implement the restructuring proposal. This required significant coordination between the English, Australian and other jurisdictions on complex cross-border implementation issues.
In Australia, the objective of the club rationalisation was to achieve an exit by Fitness First Australia (FFA) from approximately 25 clubs. FFA successfully negotiated surrenders of lease at the required clubs, the majority of which were also sold. That club rationalisation resulted in a significant reduction of FFA’s future lease liabilities and enabled the restructuring to complete.
This was one of the largest restructurings in the Australian market over the past calendar year. Ashurst lead partner James Marshall said: “The financial restructuring of the Fitness First group was a challenging and innovative transaction. From the Australian perspective, Fitness First was able to negotiate with its landlords and other stakeholders to streamline its portfolio of leased properties to a sustainable level. We were very pleased to have been able to assist Fitness First … and the senior lenders to achieve this outcome.”
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