Kennedy Lewis Investment Management LLC is suing the lenders that took control of the New York Sports Clubs and Lucille Roberts gym chains out of bankruptcy, saying the chapter 11 sale they orchestrated left the company in a precarious state, WSJ Pro Bankruptcy reported. Kennedy Lewis, formerly the largest single lender to the chains’ parent company, Town Sports International Holdings Inc., said the company’s other lenders put together a flawed deal that fell apart, forcing the investment firm to accept shares in a “virtually worthless” company. The lawsuit, filed Tuesday in New York federal court, alleged that lenders including Abry Partners LLC, Apex Credit Partners LLC and CIFC Asset Management LLC breached their credit agreements during the Town Sports chapter 11 case. The Kennedy Lewis lawsuit “is factually wrong, legally meritless, and jurisdictionally improper,” lawyers at Gibson, Dunn & Crutcher LLP representing lenders targeted by the lawsuit said in an emailed statement. The lenders named in the lawsuit intend to seek damages against Kennedy Lewis, possibly in the Delaware bankruptcy court where the case belongs, or in federal court in New York, the lawyers said. Abry, Apex, CIFC and others engineered a proposed deal to buy out Town Sports’s assets in bankruptcy, along with private-equity firm Tacit Capital LLC. But Tacit later backed out of a promise to put $47.5 million in capital into the company. Tacit’s commitment wasn’t binding, according to the lawsuit.
