Brait’s share price shot up 21.4 percent to R2.89 yesterday after it announced that talks had begun to restructure the debt of gym company Virgin Active UK. Picture: Thobile Mathonsi/African News Agency(ANA)
Brait’s share price shot up 21.4 percent to R2.89 yesterday after it announced that talks had begun to restructure the debt of gym company Virgin Active UK. Picture: Thobile Mathonsi/African News Agency(ANA)

Brait share price shoots up after reports of talks to restructure Virgin Active UK debt

By Edward West Time of article published Mar 12, 2021

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CAPE TOWN - INVESTMENT group Brait’s share price shot up 21.4 percent to R2.89 yesterday after it announced that talks had begun to restructure the debt of gym company Virgin Active UK.

The share price later closed at 17.65 percent higher at R2.80 on the JSE.

Gyms were particularly hard hit by the lockdown closures in Europe last year, and the pandemic has continued to have an impact on Virgin Active’s operations in Europe this year.

The restructuring aims to restore Virgin Active UK to financial stability, a statement said yesterday. Brait holds about 79 percent of Virgin Active.

Virgin Active Europe had been significantly adversely affected by the pandemic across its operating territories, with government-imposed shutdowns forcing temporary closure of clubs in all of the countries in which it operates.

By the end of February, the UK clubs had been closed or partially closed for nine of the previous 12 months, and its clubs in Italy had been closed for more than six of the previous 12 months.

In both territories, clubs were required to operate with significant trading restrictions when open.

Management took numerous actions given the impact on revenues.

Government support in the UK, Italy, Australia and Singapore was accessed; various rent deferrals were obtained, as were waivers and reductions in Italy, Australia, Thailand, Singapore and, to a lesser extent, the UK.

More than 95 percent of UK staff were furloughed, there were a range of salary reductions and bonus cancellations; and significant redundancies and other staff reductions were made.

Capital expenditure was cut to maintenance and trade critical expenditure only; operational costs were removed or reduced where possible, and revised payment terms were agreed with suppliers.

Government support of some £33 million (about R687.4m) during 2020 and cost mitigation measures of about £54m resulted in a total impact mitigation of £87m in 2020.

In 2020, Virgin Active Europe revenue fell 49 percent, or by £185m, which resulted in negative earnings before interest, tax, depreciation and amortisation (Ebitda) of £42m, versus positive Ebitda of £57m in 2019.

Twenty-five percent of the membership base was lost.

Despite the measures taken by management, the continued impact of the Covid-19 pandemic into this year resulted in the need for a “holistic restructuring” of the Virgin Active UK business.

Three English incorporated members of the Virgin Active group – Virgin Active Holdings Limited, Virgin Active Limited and Virgin Active Health Clubs – yesterday launched restructuring plans with certain of their creditors under Part 26A of the UK Companies Act.

The restructuring plans principally concerned Virgin Active UK. There would be an indirect benefit to the Italian and Asia Pacific businesses, as they were owned by Virgin Active UK.

The Virgin Active South Africa business was separately financed and not directly impacted by the restructuring plan.

The restructuring plan would require concessions and contributions from a number of the business’s key creditors, counterparties and stakeholders.

Shareholders of Virgin Active would provide additional liquidity through shareholder funding of £45m, of which Brait’s pro-rata share was £36m.

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