New York Sports Club Facing Bankruptcy After Coronavirus Gym Closures

One of New York City’s most beloved sports institutions may be shutting its doors after incurring over $200 million in losses during the coronavirus pandemic.

Town Sports International (TSI), the owner of New York Sports Club, has said that they are considering filing for Chapter 11 bankruptcy, per an official analysis done by Bloomberg Law. Bloomberg released the news that TSI was working with Gibson Dunn & Crutcher LLP on “restructuring” the company with hopes that it would survive the pandemic, but is struggling to refinance its existing $200 million in debt.

The news comes after Town Sports International was the subject of four class action lawsuits in four states, including one woman who claimed she was charged membership fees despite being unable to use her local gym (it was closed) and that Town Sports International refused to cancel her membership and continued to charge her despite widespread gym closures.

“All [New York Sports Clubs] gyms are currently closed and non-operational. Nonetheless, TSI is outrageously continuing to charge members their monthly membership dues, which are paid for one purpose and one purpose only—to access [New York Sports Clubs] gyms. By contract and by law, TSI charges customers membership dues strictly in exchange for gym access, and despite not providing such gym access, it continues to charge customers’ credit cards… TSI has engaged in further fraudulent consumer conduct by misrepresenting to customers that they could cancel their memberships at any time but then refusing to honor customer cancellation requests,” the complaint filed with the New York City district attorney reads. Similar complaints were filed against TSI in other states, which suggests the practice of continuing to charge customers after they tried to cancel their memberships was widespread throughout the company.

Despite these unscrupulous business practices, TSI is still on the brink of bankruptcy. Their most recent annual report to shareholders said there was “substantial doubt” about the survival of the company.

“Our ability to continue as a going concern will depend upon our ability to refinance our debt prior to its maturity,” the annual report says. “There can be no assurance that we will be able to refinance our debt, or if we are able to refinance our debt, that such financing will be on terms favorable to us.”

TSI was carrying an enormous burden of debt going into the pandemic, and without operational gyms to at least close some of the gap, it seems unlikely at this point that the company will not file for bankruptcy. Earlier this year, they negotiated a plan to buy Flywheel Sports, but that fell through after the uncertainty caused by the pandemic. Without radical intervention, it does look like TSI is going to have file for permanent bankruptcy, costing thousands of people their jobs. New York Sports Club is, sadly, just one of the many thousands of businesses in America currently struggling to stay afloat amid a national crisis.

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