What happened: The owner of Steve Nash Fitness World and Sports Clubs heads to court on Wednesday with an application to extend credit protection by a month and a half.
Why it matters: The application asks to push back the company's deadline to file a proposal to creditors under federal bankruptcy and insolvency legislation. It won't be without conflict: members represented by Victory Square Law will ask the court to reject the extension.
New court documents related to the insolvency of SNFW Fitness B.C. Ltd. suggest members at Steve Nash Fitness, UFC Gym and Crunch Fitness clubs in B.C. are owed millions for prepaid gym memberships and personal training sessions.
In a second report to court, the matter’s trustee wrote that SNFW Fitness owes approximately $12 million to unsecured creditors, including club members who prepaid for memberships and personal training.
The amount is two and a half times larger than the approximate $3.4 million listed as owing to unsecured creditors in the trustee’s first report to court. The initial list of unsecured creditors primarily featured businesses, each owed anywhere from hundreds to hundreds of thousands of dollars for goods and services supplied to SNFW Fitness. All prepaid memberships and all personal training memberships were collectively valued $250 per category – placeholder amounts as full amounts owing were being calculated.
The trustee’s second report suggests SNFW Fitness owes as much as $8.6 million to members who have been unable to use their memberships since mid-March.
Some members have told BIV they have been successful in charging back amounts paid to the company with help from credit card providers. Some have been told by credit card companies that chargebacks cannot be issued until a bankruptcy is declared.
Others hope their gym will re-open and honour their membership.
The total amount owed to unsecured creditors – current as of April 3 – is likely higher than the amount listed in the trustee’s latest report to court. Rent owed to landlords across 32 locations leased by SNFW Fitness, for example, has not been included.
Mario Mainella, a licensed insolvency trustee with The Bowra Group, told BIV in April that landlords are owed approximately $1.5 million for rent not paid that month. The company has not paid rent in May or June “due to the COVID-19 shutdown,” according to court documents, which state that all but one landlord have not taken any action.
For the time being, all actions against SNFW Fitness are stayed as the company remains under creditor protection.
The $12 million owed to unsecured creditors also excludes severance owed to employees. The company typically employs around 1,300 people. All but six key personnel were terminated in March.
Victory Square Law Office LLP, which represents two groups of former SNFW Fitness employees in two separate class actions, claims the company terminated employees “as part of a longer-term strategy to advantage its owner.”
On Monday, the firm filed a response to a notice of application brought by SNFW Fitness last week to extend by a month and a half the company’s creditor protection, and its deadline for filing a proposal under federal bankruptcy and insolvency legislation.
If granted, this would be the second extension of a proposal process that started April 3, when SNFW Fitness filed a notice of intention to make a proposal with Canada’s Office of the Superintendent of Bankruptcy. A successful application would push the deadline to file a proposal to creditors to August 3.
While under creditor protection, SNFW Fitness – with support from The Bowra Group and MNP Corporate Finance – solicited offers to buy the company under a sales process approved by BC Supreme Court.
A successful bidder has been selected, but not publicly disclosed. The trustee will file a report on the sales process and its results at a later date. That process is separate from the process of filing a proposal under federal legislation.
Victory Square Law claims that former employees have been denied access to severance and termination pay, and that the company’s proposal “seeks to eliminate any recovery at all for all 1,300 of its former employees.”
In a court document filed this week, the firm argues the application by SNFW Fitness should be dismissed.
The matter will be heard in BC Supreme Court on Wednesday.