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24 Hour Fitness files for bankruptcy amid onslaught of gym closures

24 Hour Fitness sought court protection from its creditors, unable to keep up with debt payments after the prolonged shutdown caused by the coronavirus outbreak.

The fitness chain’s Chapter 11 petition was filed in Delaware, court papers show. Chapter 11 allows a company to keep operating while it works out a plan to pay its creditors and ease its debt load.

Even before the onslaught of the coronavirus, middle-tier operators like 24 Hour struggled with customer defections to higher-end or budget-friendly fitness options. The gym operator posted a 2% revenue decline in unaudited fourth-quarter earnings, Bloomberg reported.

Privately held 24 Hour operated more than 430 clubs, including North Bay locations in Santa Rosa, Rohnert Park, Petaluma and Larkspur. It and is based in San Ramon. It has closed more than 130 locations locations, including 13 in the Bay Area, with two in the North Bay: 4300 Sonoma Blvd. in Vallejo and Solano Mall in Fairfield.

The company reported a slide in 2019 earnings partly due to the rocky debut of an automated system for checking in and signing up customers. Memberships at the company fell to 3.4 million in 2019’s third quarter from 3.5 million in the second quarter, according to Moody’s Investors Service.

Cancellations are killers for gyms. It costs twice as much to recruit a new member as it does to retain an existing one. Roughly 28 of 100 U.S. gym members are expected to bail this year, according to trade group International Health, Racquet & Sportsclub Association.

Chief Executive Officer Tony Ueber had to close all of the chain’s gyms in the middle of March, in line with other businesses across the U.S., to stop the spread of the virus. The company fully drew its $120 million credit line to cope with the expected impact of the pandemic.

Management had been in talks with creditors to rework its debt load, but negotiations ended in a stalemate around the time of the closures, 24 Hour Fitness said in a March 23 earnings report.

The case is No. 20-11558, filed in the U.S. Bankruptcy Court for the District of Delaware.

North Bay Business Journal contributed to this report.