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Two UK chains bounce back

Two major U.K. health club chains that had recently confronted significant financial challenges have apparently managed to deal with them successfully.

LA Fitness Limited and LA Leisure Limited (“LA Fitness”), based in Doncaster, South Yorkshire, will sell 33 of its 80 clubs as part of a restructuring plan that will allow it to focus on a smaller portfolio of 47 clubs. It’s also entered into Company Voluntary Arrangements with its landlords and other creditors that will revise the lease terms at a number of its facilities.

The net financial impact of the changes will be a reduction in the company’s debt burden of approximately $419.8 million (£250 million).

“LA Fitness is a strong brand that is valued by its members,” Martin Long, the chain’s CEO, said in a press release. “We have had a good start to 2014, and our membership numbers are up year-to-year. It’s a structural issue that (has been) hampering LA Fitness, and it’s through this process that we’ll create a leaner, more operationally efficient business, with a long-term, sustainable future as one of the U.K.’s leading health and fitness operators.”

The Bannatyne Health Club chain, founded by Duncan Bannatyne, also has engaged in a restructuring that’s contributed to a financial turnaround. The company, based in Darlington, County Durham, sold 39 of its clubs, but entered into a long- term leaseback arrangement with the new owner, M&G Investments, to continue operating the facilities. It subsequently paid off a $154.5 million (£92 million) debt with the Anglo Irish Bank, relieving the chain of $16.8 million (£10 million) in annual bank payments.

“The result is a stronger business which has the resources to invest and grow in the future,” says Bannatyne.

The largest private chain in the U.K., Bannatyne operates 59 facilities that serve some 170,00 0members.

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