Unsecured creditors of bankrupt VI Fitness Centres, including thousands of gym members and more than 100 employees,will not be getting any money from the auction of its equipment.
And there is not enough money to pay off all secured creditors, who are first in line in a situation like this, said Mario Mainella, senior vice-president of the Bowra Group, the insolvency trustee.
The closure of the company’s fitness centres on May 2 was a shock to members and employees. When the company collapsed, it had 9,000 gym members, 138 employees and 118 contractors, said Bowra’s report to creditors filed with the Supreme Court of B.C.
It had eight locations on Vancouver Island, with two gyms in Nanaimo and one in each of Saanich, Langford, Oak Bay, Saanichton, Courtenay and Campbell River. All were in leased spaces.
The company owed $5.7 million to creditors and estimated its assets — fitness equipment and clothing and related supplies — at $200,000. Assets were auctioned in June in Nanaimo.
Creditors submitted claims of less than $100 to thousands of dollars. They include individuals, local business, utility services, government and employees.
Staff could apply for money owed through the federal wage earner protection program.
VI Fitness Centres opened in 1993 and grew into one of the largest fitness centres on Vancouver Island, the trustee’s report said. It is owned by the InnHouse Group of Companies.
Starting in 2016, the company “experienced increased competition due to fitness centres that opened at more convenient locations with new equipment and lower monthly members rates than VI,” the report said.
“In addition, the competition were offering no term membership. At that time, VI was selling memberships with terms greater than one year at a rate of approximately $48 per month.”
VI responded by offering promotions for members with no term contracts at about $38 a month, the report said. Even so, that rate was between $10 and $28 a month higher than low-cost competitors. “All of which resulted in declining revenues and losses for the company.”
In the 18 months prior to the May financial collapse, VI Fitness incurred operating losses of $1.4 million, Bowra’s report said.
