California Fitness closures

Wanted: Buyer for gyms who'll lend a hand

California Fitness closed down its Republic Plaza branch suddenly last Saturday, followed by its Novena (above) and Bugis outlets on Wednesday, leaving members high and dry after having paid upfront thousands in membership fees.
California Fitness closed down its Republic Plaza branch suddenly last Saturday, followed by its Novena (above) and Bugis outlets on Wednesday, leaving members high and dry after having paid upfront thousands in membership fees.ST PHOTO: AZMI ATHNI

Effort being made to seek out a buyer willing to help out affected members

The memberships in California Fitness are not part of the sale of the chain's three gyms and equipment following their abrupt closure over the past week, but there is an effort to seek out a buyer who would be willing to lend a helping hand to affected members.

This is according to the fitness chain's provisional liquidators, Ferrier Hodgson.

The recovery firm also told The Straits Times yesterday that the owner of California Fitness' gym outlets, JV Fitness, will not be sold.

California Fitness closed down its Republic Plaza branch suddenly last Saturday, followed by its Novena and Bugis outlets on Wednesday, leaving members high and dry after having paid upfront thousands in membership fees.

Mr Tim Reid, a partner at Ferrier Hodgson, said that it is the recovery firm's "objective to secure the cooperation of potential buyers to offer attractive membership rights to existing California Fitness members".

So if the potential buyers, Ferrier Hodgson and the landlords of the gyms can come to an agreement, members who have had workout schedules disrupted after the gyms shut may see services offered to them in the same premises again.

Even so, other alternatives have been offered to affected members. HomeTeamNS, a non-profit organisation that recognises the contributions of police and Singapore Civil Defence Force national servicemen (NSmen), said yesterday it will offer its members and NSmen affected by California Fitness' gym closures up to six months of free usage at selected branches of its Fitness Workz gyms.

Another gym chain, True Fitness, is offering a one-month free trial to all affected members.

However, California Fitness members who want refunds instead could find it harder to get their money back .

Gym members form the largest creditors of California Fitness in terms of size and value owed to them, said Ferrier Hodgson.

But this might not translate into a tangible advantage. Gym members are still unsecured creditors. This means they do not get priority in laying claims to any assets the company might have.

Said lawyer Mohamed Baiross: "The fact that they are a large group of creditors actually diminishes their chances of getting a substantial recovery."

Whatever assets the troubled gym chain might have will first be used to pay off any secured or preferential creditors - which could include banks or the tax authorities. So, there is a chance there might not be sufficient funds leftover to pay each affected gym member in full, especially if any remaining funds have to be divided among many members.

Still, not all cases of establishments shutting end in defeat for consumers. When Borders Singapore closed down all its branches here in 2011, gift-card holders with the bookstore managed to get full refunds in the following year.

Still, this case is different from California Fitness', said Mr Reid, who also handled Borders Singapore's closure. "The gift-card holders made up a much smaller proportion of the liabilities in the Borders case," he added.

The Consumers Association of Singapore has advised members against contacting the provisional liquidators, who already have a comprehensive list of members' details.

A version of this article appeared in the print edition of The Straits Times on July 23, 2016, with the headline 'Wanted: Buyer for gyms who'll lend a hand'. Print Edition | Subscribe