%1

Indoor cycling studio chain Cyc Holdings LLC filed for bankruptcy after the coronavirus temporarily shut down its operations in cities across the U.S., Bloomberg News reported. The fitness company’s chapter 11 petition filed in Delaware on Wednesday will allow Cyc to get out of leases and pay back creditors while continuing to operate. Cyc is the latest in a string of fitness companies to seek bankruptcy protection after struggling to coax back members following some easing of coronavirus shutdowns. It operated studios across major cities in the U.S., including New York and Los Angeles. Zengo Fitness LLC, an affiliate of Cyc with studios in the Washington, D.C., area, and the company’s California-based Cycle House locations also sought court protection, papers show. Cyc’s bankruptcy follows other cycling boutiques. Flywheel Sports Inc., the operator of studios beloved by fitness-obsessed city dwellers, filed chapter 7 last month with plans to go out of business and sell its assets to pay off debts and close locations.

The chances of Congress passing a pre-election stimulus are all but gone, as Treasury Secretary Steven Mnuchin yesterday blamed politics for undermining the months-long negotiations, Bloomberg News reported. “At this point getting something done before the election and executing on that would be difficult, just given where we are in the level of details,” Mnuchin said. With a deal out of reach, the two sides in the talks faulted each other for the breakdown. The Treasury chief, who is scheduled to be in the Middle East next week, made his remarks after another in a long series of calls with Pelosi that have failed to seal a deal. While Mnuchin said he hoped for bipartisan support for Senate Majority Leader Mitch McConnell’s latest idea -- a vote on a narrow bill next week to help small businesses -- Democratic leaders have no appetite for piecemeal measures now. The inability to bring months of negotiations to conclusion has sparked increasing tensions, with each camp seeing internal strains rise as it becomes clear there won’t be a spending bill to take to the public.

Ascena Retail Group Inc., the parent company of Ann Taylor and Lane Bryant, got a $35 million offer to buy tween chain Justice out of bankruptcy and turn it into a primarily online brand, the Wall Street Journal reported. The company has reached a deal for Premier Brands Justice LLC, an acquisition vehicle of apparel maker and distributor IHL Group, to serve as the stalking-horse bidder for the sale of the intellectual property, e-commerce business and other assets of the Justice brand. New York-based IHL, a division of USA Apparel Group Inc., has a portfolio of licensed brands including Aéropostale, BCBG, Rachel Roy and Daisy Fuentes. The Justice deal includes the assumption of certain liabilities and the potential to assume contracts and unexpired leases. The agreement is subject to better bids and final approval by the bankruptcy court.

Lenders to high-end gym chain Equinox Holdings Inc. have organized and hired a law firm to help protect their holdings as the company seeks to shore up its finances amid the pandemic, Bloomberg News reported. Investors holding close to a majority of Equinox’s roughly $1 billion loan brought in legal advisers from Akin Gump Strauss Hauer & Feld and are in the process of adding more lenders to the group. The New York-based gym operator is facing a February 2021 deadline to repurchase certain debt tied to its SoulCycle spin studio chain. It’s also been hampered by lockdowns and social distancing measures that place limits on visitors and operating hours at certain locations. SoulCycle has been allowed to resume operations in some cities and is conducting outdoor classes elsewhere. In May, Equinox received an amendment allowing it to delay repurchasing some of SoulCycle’s debt until next year, according to S&P Global Ratings. Equinox had guaranteed the SoulCycle borrowings in a deal that normally required it to buy back the obligations when the spin studios’ debt relative to earnings exceeded certain thresholds. HPS Investment Partners is the SoulCycle lender and provided the forbearance. S&P said that it viewed the amendment as tantamount to default. In February, Equinox will have to buy back enough debt to reduce SoulCycle’s debt relative to earnings to below five times, the credit grader said in a June report. Equinox has been burning cash and is expected to have elevated debt relative to earnings after it was forced to close locations to help stem the spread of Covid-19, S&P said. In June, the gym chain took on a new $150 million loan that ranks equal with its $1 billion obligation in line for repayment.

The White House again pivoted its approach to stimulus negotiations on Sunday, with the president’s aides pushing for immediate action on a narrow measure after the administration’s $1.8 trillion proposal was rebuffed by members of both parties, the Washington Post reported. In a letter to Congress sent Sunday, White House Chief of Staff Mark Meadows and Treasury Secretary Steven Mnuchin asked lawmakers to first pass legislation allowing the Trump administration to redirect about $130 billion in unused funding from the Paycheck Protection Program intended for small businesses while negotiations continue on a broader relief effort. The administration’s latest request is unlikely to advance in the House, where Speaker Nancy Pelosi (D-Calif.) has rejected stand-alone legislation in favor of a comprehensive package to address the economic and health consequences of the coronavirus pandemic. The administration’s $1.8 trillion stimulus proposal on Friday came under heavy criticism from lawmakers in both parties over the weekend, making its chances of passing appear remote. White House officials will request that Congress approve legislation allowing firms demonstrating a decline in revenue to apply for a second round of PPP funding, which they are not allowed to do under existing law, according to one person familiar with the plans who spoke on the condition of anonymity to discuss the administration’s internal planning.

The bankrupt operator of New York Sports Clubs and Lucille Roberts gyms has received court approval to conduct a speedy chapter 11 sale process, positioning the company to sell itself by next month to a group of lenders and a private-equity firm, WSJ Pro Bankruptcy reported. The lenders and Tacit Capital LLC last month agreed to serve as the lead bidder, or stalking horse, to acquire assets of Town Sports International Holdings Inc., valuing their deal at about $85 million, the minimum price for other bidders to beat. Judge Christopher Sontchi of the U.S. Bankruptcy Court in Wilmington, Del., said Friday he would approve the bidding rules that will subject the Tacit-led offer to other bids. “I’m perfectly happy to approve the bid procedures order as modified and as consensual and uncontested,” Judge Sontchi said during a hearing held by phone and video. The deadline to submit qualified bids is Oct. 26, followed by an auction, if necessary. The company is targeting early November to get the sale approved given liquidity concerns, Town Sports lawyer Joshua Altman said.

Investors sued Boardriders Inc., the company behind the Quiksilver and Billabong brands, over a $431 million rescue financing package they said elevated the interests of a select group of lenders and private-equity backer Oaktree Capital Management LP, WSJ Pro Bankruptcy reported. Intermediate Capital Group PLC, York Capital Management and other lenders filed a lawsuit in the Supreme Court of New York on Friday, challenging an August financing deal that supplied the surfwear-inspired apparel company with $110 million in fresh capital from a group of lenders. In return for the infusion, Boardriders gave those parties top-ranking collateral rights on $321 million of loans they already held, pushing other lenders that didn’t participate down in the payment line, according to the complaint. The lenders that filed the suit are seeking a judgment invalidating and unwinding the transaction.

A Brentwood, Pa., restaurant ordered to close for ignoring COVID-19 masking requirements has filed for chapter 11 bankruptcy, the Pittsburgh Post-Gazette reported. The Crack’d Egg filed the petition on Friday in U.S. Bankruptcy Court in Pittsburgh, and it will continue to operate while the owners reorganize. The restaurant, owned by Kimberly Waigand, made headlines last month after the Allegheny County Health Department ordered it to close for flouting COVID-19 masking rules. In response, the restaurant filed a federal civil rights lawsuit against the Health Department. The shutdown order and the lawsuit have been stayed while the bankruptcy case proceeds. Attorneys said the restaurant’s financial woes are largely due to a loss in revenue following statewide COVID-19 mitigation rules that reduced maximum restaurant capacity to 25 percent. According to the restaurant’s bankruptcy filing, it owes nearly $445,000 in unsecured debt to its creditors. The largest amount, $350,000, comes from Waigand’s husband, Donald. The money for the investment came from a settlement Waigand received after he was in an accident, Cooney said. The restaurant has been under scrutiny since Allegheny County sought its closure after inspectors repeatedly saw employees without face masks, a health violation under the COVID-19 guidelines.

Bankruptcy Judge David Jones is urging a group of JCPenney Co. creditors, including Aurelius Capital Management, to submit a competing bid to buy the ailing retailer, Bloomberg News reported. The push comes as JCPenney, its biggest landlords and holders of most of its senior debt work to execute a bid that would rescue the company by October 16. The deal -- which would see Simon Property Group Inc. and Brookfield Property Partners buy the retailer’s operations and keep stores open -- was announced nearly a month ago, but no definitive agreements have been signed. A group of creditors, including Aurelius, that hold $162 million of term loans and other JCPenney debt attacked the proposed deal this week, calling it overly generous to other creditors. They said that they’re pulling together their own bid. Josh Sussberg, a Kirkland & Ellis attorney representing JCPenney, said any competing bid would have to top $2.47 billion to repay the retailer’s bankruptcy loan and first-lien debt, which would be forgiven as part of the existing offer. An attorney for the Aurelius group disagreed, arguing they could offer to buy a swath of JCPenney stores and still let Simon and Brookfield take over the operations.

Hertz Global Holdings Inc. dropped its plan to hand out as much as $5.4 million in executive incentive bonuses this year after the judge overseeing the company’s bankruptcy called the idea “offensive,” Bloomberg News reported. Instead, Hertz will push forward with an $8.2 million bonus program for less-senior managers, designed to motivate them while the company reorganizes in bankruptcy, the car renter said in a court filing yesterday. Hertz may try again to give the executives a bonus next year, the company said. “In the face of the court’s strong statements, the debtors seriously considered abandoning the incentive plans altogether,” Hertz said in the court filing aimed at persuading U.S. Bankruptcy Judge Mary Walrath to allow bonuses for lower-ranking executives. Last month, Judge Walrath sided with opponents, who argued that the bonus program came too soon after $16.2 million in retention money Hertz agreed to hand out to about 340 employees just days before it filed for bankruptcy in May. Judge Walrath’s decision nixed a plan to split as much as $5.4 million in bonuses among 14 top executives and allowed another 295 lower-ranking managers to share up to $9.2 million. As part of the original deal, employees agreed to forgo their 2020 bonuses, Bloomberg Law previously reported. The new bonuses were “in reality the 2020 bonuses under a different name,” according to the U.S. Trustee, the Department of Justice’s bankruptcy watchdog. Hertz argued in today’s filing that the retention bonuses were different from the proposed incentive payments.