Image: Fitness First will retain 80 UK health clubs

Fitness First has announced plans to sell 67 UK gyms and has initiated a Company Voluntary Arrangement (CVA) as part of the health club operator's restructuring process.

It is expected the CVA - to be supervised by KPMG - will take approximately three weeks to complete and is designed to allow the business to restructure its lease agreements.

According to KPMG, the main components of the CVA include the continued trading of all Fitness First clubs, with 57 gyms retained at current rents paid monthly for three years, rather than quarterly.

A further five gyms will be retained at a reduced equivalent monthly rate of 65 per cent over the three-year period before returning to market-based rent. The leases to 18 other UK facilities will remain unaffected.

The clubs being sold are expected to be transferred to other operators in "most cases", with members able to move contracts to the new owners at no extra cost.

Among the Fitness First gyms to be sold include sites in Birmingham; Chelmsford; Derby; Newcastle; and Stevenage, as well as five Klick-branded sites across northern England.

Incoming Fitness First CEO Andrew Cosslett said: "We have worked hard with KPMG to put in place a CVA structure which will allow us to renegotiate leases at sites in the UK where current rent levels are unsustainable.

"At the same time we are selling clubs which no longer fit into our future vision for Fitness First. Employees' jobs will be protected as far as possible."

KPMG UK head of restructuring Richard Fleming added: "The CVA proposed by Fitness First gives the company a vital life line to avoid administration, by renegotiating the lease terms of its property portfolio."

Liz Peace, chief executive of the British Property Federation, welcomed the inclusion of an arrangement within the CVA that could see landlords claim a share of profits in Fitness First once it returns to financial health.

Peace said: "It is extremely welcome to see a 'claw-back' arrangement included in this CVA and we hope that this further establishes a precedent that the use of these provisions should be included as a matter of course in future CVAs."

• A number of Fitness First clubs in Australia are also being sold off by the group as part of its restructuring process, with nearly a quarter (24) of the 97-gym portfolio to be offloaded.

Fitness First Australia - a division of the Fitness First group - has recruited 333 Capital to help secure new owners for the facilities, which include gyms in Wollongong and Essendon.

Pete Manuel, managing director of Fitness First Australia, said: "The previous group debt burden (AU$890m (£561m)) will be virtually removed and the business will have significant financial firepower going forward."

Despite the proposed Australian sales, Fitness First will be opening a new gym in Perth, Western Australia, on 21 June.

Details: www.fitnessfirst.co.uk (Fitness First CVA Details)

Details: www.fitnessfirst.com.au (Fitness First Australia) (.pdf)