Thousands of health and fitness jobs are hanging in the balance as Virgin Active awaits a ruling that will determine whether it collapses into insolvency.
Sky News understands that the gym chain will discover as soon as this week whether a restructuring plan that is facing opposition from landlords will receive court approval.
Sources said that if the so-called Part 26A proposal is blocked, Virgin Active could fall into administration within days.
Such a move would potentially put more than 2,000 jobs at risk just as the health and fitness sector tries to return to its feet after a year of turmoil.
Brait, Virgin Active’s majority shareholder, has signalled that it will not inject more capital into the business unless the restructuring is approved.
The proposals are being closely watched among insolvency practitioners and lawyers who believe that their implementation by Virgin Active could herald a wave of similar plans.
NCP, the car parks operator, has announced that it wants to pursue such a financial reorganisation.
Landlords including Aberdeen Standard Investments and British Land have argued that they would be left shouldering a disproportionate part of the financial pain from the Virgin Active deal.
Property owners will be forced to write off millions of pounds in rent arrears and agree to future reductions if the restructuring is approved.
The gyms group, which is part-owned by Sir Richard Branson, says the proposals represent a "holistic but equitable solution, with shareholders contributing over 50% of proposed contributions".
The court ruling will come amid a fierce debate about the impact of the pandemic on commercial landlords, who argue that a government moratorium on evictions has left them unfairly penalised.
Britain’s leading commercial real estate trade association has warned that approving the Virgin Active restructuring would "set a dangerous precedent".
Virgin Active’s plans follow a glut of controversial company voluntary arrangements in recent years, which have been used by retailers such as Arcadia Group, Debenhams and New Look.
Some of those chains have collapsed even after seeing CVAs voted through by creditors.
Virgin Active has seen its roughly 40 UK sites forced to close for most of the last year, exacerbating the financial squeeze confronting it.
It wants to implement its refinancing under Part 26A of the Companies Act, meaning that a creditor group such as its landlords faces being "crammed down" – or forced to accept the terms even if they vote against the scheme.
Launched in Britain in 1999, the group now has 236 clubs in eight countries, including Australia, Botswana, Italy and South Africa.
At the end of 2019, it had more than one million members worldwide.
The pandemic’s impact has been severe, however, resulting in revenues halving last year and a loss before interest, tax, depreciation and amortisation of £42m.
Virgin Active also saw 100,000 members leave during the year.
Under its proposals, its shareholders would inject £45m of cash, alongside roughly £17m of royalty fee deferrals.
Deloitte, the accountancy firm, is overseeing the restructuring plan.