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Home » Fitness » Fitness First could breach covenants in two months as entire management team is fired

BC Partners has two months to rescue its troubled gym chain Fitness First before it faces breaching its banking covenants.

The private equity firm fired the company’s entire top management, including chief executive Colin Waggett, finance director Duncan Tatton-Brown, and UK managing director John Gamble.

BC Partners was forced to pull the £1bn Singapore listing last year after 17 of the 20 previous flotations tanked bellow their IPO listing price.

Fitness First, which employs about 13,000 people and has 430 clubs worldwide, has £530m of debt held by a wide range of banks and hedge funds.

It is in talks with lenders over a covenant test that will be reported to banks at the end of March. The company has seen its earnings before interest tax depreciation and amortisation (EBITDA) shrink from £146m to £115m last year just as its debt covenants have been ratcheting down.

Now, Fitness First has 20 months to pay back the £530m it owes to the banks. The company also faces the repayment of a shareholder loan note of £500m however, this is owned by BC Partners and so does not affect its solvency.

BC Partners must convince lenders that it has a credible turnaround plan in order to be allowed to refinance the debt. The buy-out firm could also ask banks to cut some of the debt in exchange for a capital injection. It has brought in private equity favourite Chris Stone, who helped fix Northgate (Other OTC: NGTEF.PK - news) Information Solutions.

At its peak, Fitness First operated 550 clubs across 20 countries, including 162 in the UK.

Now, despite turnover being resilient, profits have dropped, with severe margin contraction.

The costs expended by the former management team which owns 18pc of the company - has failed to deliver the promised growth at the time of the 2005 £838m acquisition.

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Fitness First could breach covenants in two months as entire management team is fired

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Home » Fitness » Fitness First could breach covenants in two months as entire management team is fired