F45 Training, Austin, Texas, has closed on a new $90 million subordinated debt facility that was provided by a consortium of existing investors led by affiliates of Kennedy Lewis Management LP, which made an unsolicited bid in September to purchase the publicly traded company.
A special committee formed by F45 Training to review and evaluate the bid from Kennedy Lewis paused its review while the company secured the debt facility, the franchise functional fitness company shared in a media release on Feb. 15. F45 Training has not received anything further from Kennedy Lewis with respect to its prior proposal or a revised proposal, but F45 will review any revision of the existing proposal or new proposal if submitted, F45 Training said.
“We’re pleased to deepen our partnership with F45, an innovator with a differentiated brand that is uniquely positioned to capitalize on the growing trend of consumers prioritizing health and fitness in their daily lives,” Darren Richman, co-founder, co-portfolio manager and co-managing partner of Kennedy Lewis, said in the announcement. “As long-time investors in F45, we have a deep understanding of, and continued confidence in, the business and the opportunity ahead for F45 as a disruptor in the fitness space.”
The new debt facility has a five-and-a-half-year term, with interest to be paid in kind. Net proceeds will be used for, among other things, general corporate purposes and a partial paydown of the company’s existing senior secured revolving credit facility with JP Morgan Chase Bank, N.A. Concurrent with the closing of the new facility and the partial paydown, the company amended the JPM facility to be structured as a $70 million senior secured facility with a two-year term, comprising a $68 million term loan and a $2 million revolving credit facility.
At the close of the deal on the debt facility, several board members resigned, and new independent board members were elected. Gene Davis, who joined the board in November, was appointed chairman of the board. Since 1999, Davis has been chairman and CEO of consulting company PIRINATE Consulting Group, LLC, which specializes in restructuring and governance issues, liquidation management, merger and acquisition consulting and proxy contests.
Angelo Demasi, Vanessa Douglas, and Lee Wallace left the board and were replaced by Timothy Bernlohr, Lisa Gavales, Steven Scheiwe, and Ray Wallander.
Remaining on the board with Davis are Ben Coates, Adam Gilchrist, Elizabeth Josefsberg, and Michael Raymond, as well as F45 investor, brand ambassador and actor Mark Wahlberg.
Gilchrist was one of the founders of F45 Training and served as CEO until July 2022 when he stepped down from that position. Coates then took on the title of interim CEO.
Also this month, F45 Training named Bob Madore as interim CFO. The CFO position had been open since November when former CFO Chris Payne left the company to address personal and family matters in Australia, according to the company.
F45 Training has entered into multiple partnerships, including some that install F45 locations at Hiltons, in colleges and at military bases.
But it also has experienced several issues since it went public in July 2021.
On July 26, 2022, when the company announced that Gilchrist was stepped down as CEO, the company also laid off 110 employees, about 45 percent of its corporate staff, as part of a restructuring. It also downgraded its 2022 guidance, saying that two financing facilities that would have offered a $250 credit line for franchisees to expand would not be available, which would mean the company would open 60 percent fewer new locations than promised in its guidance two months prior.
The next day, the price of shares of F45 Training stock fell 60 percent, and the share, which at the time of its initial public offering were trading around $16, have not traded above $4 since then.
As a result, several law firms announced they would bring class action lawsuits against F45 Training on behalf of shareholders.
In addition, the company faces a $20 million lawsuit from soccer star David Beckham and golfer Greg Norman, who are brand ambassadors for the company, accusing F45 Training of not following through on its commitment to pay them cash and equity compensation due them in exchange for their promotion of the brand.
F45 Training trades on the New York Stock Exchanges under FXLV. Shares opened on Feb. 15 at $2.83, and after the announcement of the debt facility, it closed that day at $3.02 per share.