No recovery to unsecured creditors of Steve Nash Fitness

Unsecured creditors collectively owed $12 million will not receive funds from the company’s sale, if the deal is approved

A $9 million purchase offer for the company behind Steve Nash Fitness is expected to be heard in court on Thursday, July 23 | @snclubs/Instagram

What happened: The proposed sale of Steve Nash Fitness will result in no recovery for unsecured creditors, who are collectively owed upwards of $12 million, according to new court documents.

Why it matters: There are roughly 140 businesses and service providers, each owed between hundreds and hundreds of thousands of dollars, who will not be paid.

The proposed purchase of the company behind Steve Nash Fitness will result in no recovery for unsecured creditors, who are collectively owed upwards of $12 million.

Unsecured creditors include approximately 140 businesses, service providers and contractors who are each owed between hundreds and hundreds of thousands of dollars. Members who prepaid for memberships or personal training sessions will not necessarily be eligible for refunds.

The purchase offer comes from a newly formed company that includes the existing ownership of SNFW Fitness B.C. Ltd. and its current CEO. 

The deal requires court approval, and will be heard before the BC Supreme Court later today.

BIV reported yesterday that the purchase offer from FW Fitness BC Ltd. – which was incorporated less than two weeks ago – is for $9 million.

SNFW Fitness B.C. Ltd. – which operated more than two-dozen fitness locations under Steve Nash Fitness, Crunch Fitness and UFC Gyms brands pre-pandemic – owes more than $46 million to secured and unsecured creditors, according to the most recent information available on the company’s finances.

That figure excludes employee severance and rent owed to landlords on 32 leased locations, many of which are not included in the purchase agreement.

The majority of the money owed by SNFW Fitness is owed to the Bank of Montreal (BMO), the company’s primary secured creditor. The sale will result in a $25 million shortfall to BMO, which is owed in excess of $34 million.

The bank supports the deal, which was one of four offers received by The Bowra Group Inc. The group was appointed as trustee in the insolvency proceedings of SNFW Fitness, which began in April. BMO also recently appointed the group as receiver to “protect its position,” according to court documents.

The Bowra Group recommends that the BC Supreme Court approve the sale, which it says is the best offer generated by a months-long sales process.

Three bids were initially received in that sales process and deemed “unacceptable,” according to the trustee’s third report to court. The bidders were given an opportunity to re-submit their bids, and a fourth party was given an opportunity to submit an offer.

The highest offer was for $15 million cash and up to 30% equity in the bidding party. According to the trustee’s report, the deal would have required an additional six to eight weeks of due diligence, and there was a high risk that the sale wouldn’t complete.

Another party offered $6 million in cash and equity shares in the bidding party, valued at $10 million. The third unsuccessful bid offered a little over $534,000 in cash.

Same ownership, different company

Court documents confirm that the shareholders of FW Fitness BC include the CEO of SNFW Fitness and one of its shareholders. It is believed the latter is Mark Mastrov, who is listed as a director of FW Fitness and who co-founded SNFW Fitness, though he is not explicitly named in the trustee's report to court.

Even under similar ownership and management, the fitness company will look different once locations re-open.

All locations will be rebranded to Fitness World, for example, and all mentions and references to Canadian basketball legend Steve Nash would need to be removed within 180 days of the deal's closing date, if the deal is approved. 

A number of locations that existed under SNFW Fitness are not part of the deal. According to the purchase offer, excluded leases include: UFC Gyms locations in Port Coquitlam, North Vancouver and Burnaby; Steve Nash locations in Brentwood, Yaletown, Park Royal, Richmond, Morgan Crossing, Downtown Vancouver, Delta, North Vancouver, Abbotsford and Port Coquitlam; a Crunch Fitness location in Burnaby, and; the head office of SNFW Fitness in Richmond.

Depending on the number of locations that can or will be re-opened, FW Fitness originally anticipated being able to offer employment to 65% of SNFW Fitness employees, according to a notice of application filed by SNFW Fitness. That number is now closer to 50%, according to the trustee's report. The purchase agreement states that FW Fitness is committing to offer employment to up to 50% of employees.

The agreement also states that the new company will not assume liabilities to employees that existed prior to the deal's closing, such as wages, overtime and holiday pay, severance and reimbursements. Those obligations will remain with SNFW Fitness.

FW Fitness will also not be responsible for refunds for memberships and prepaid personal training sessions purchased from SNFW Fitness. The company has said it intends to honour all existing memberships and sessions.