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The entrance to the Adelaide Club at First Canadian Place in Toronto on Dec. 13, 2020.Yader Guzman/The Globe and Mail

The owner of three cornerstone Bay Street health clubs filed for creditor protection last week, attempting to strike a deal with creditors and landlords that keeps the high-end fitness centres going until the pandemic ends.

Entrepreneur Clive Caldwell, owner of the Adelaide Club, the Cambridge Club and the Toronto Athletic Club in downtown Toronto, is asking the courts to help his private company, Cambridge Group Inc., restructure $2-million of debt and rework leases with landlords. Mr. Caldwell is attempting to ensure 234 staff have jobs and 6,500 members – a cast of corporate movers and shakers – have a place to work out and hang out when COVID-19 lockdowns are lifted.

“This process gives us a chance to survive and flourish again,” Mr. Caldwell said in an interview on Sunday. “To their credit, the bank and our landlords are on side; they are supportive.” The former championship squash player said running three clubs during a pandemic “is like getting repeatedly whacked in the head with a two-by-four.”

The 217-page filing in Ontario Superior Court of Justice details challenges common to small-business owners across the country as they struggle to survive the COVID-19 crisis.

The gyms, squash courts and restaurants at Mr. Caldwell’s three properties – one of which looks out over Lake Ontario from the 36th floor of a TD Centre tower – were consistently full and Cambridge Group turned a steady profit before the pandemic hit. “The clubs are not simply gyms,” said Mr. Caldwell in a court filing. “Rather, the philosophy of the clubs has been to provide a unique experience for its 6,500 members to train, play and socialize within a community of close-knit members.”

“I have spent almost half a century putting my blood, sweat and tears into creating the most unique and special health clubs in Canada,” said Mr. Caldwell, who began working at the Cambridge Club as a squash pro in 1973 and acquired the facility in 1991. He said: “The COVID-19 pandemic has created unparalleled challenges for Cambridge, with devastating consequences.”

Cambridge Group’s filings show a company hitting the financial wall. In better times, at the end of the 2019 fiscal year, the company had just $592,000 in debt. Over the past nine months, the company all but shut down. During the pandemic, the clubs were reduced to offering online fitness classes, with 54 employees currently on the payroll. Revenues are down 82 per cent from last year.

The company opted to tap a credit line from Bank of Nova Scotia to pay essential bills. When Cambridge Group filed for credit protection last week, its liabilities totalled $7-million. That included $2-million of accounts payable – including unpaid rent – and $1.1-million on the Scotiabank credit line.

Cambridge Group decided to file for creditor protection because it does not have the cash to make an interest payment in early January on a total of $2-million of loans from Scotiabank.

“Cambridge is insolvent and faces an imminent liquidity crisis,” the court filing said. The company said the legal filing is meant “to provide some breathing space for Cambridge to develop an orderly restructuring of its business that will allow it to reopen its clubs when government restrictions are lifted and when a sufficient number of members are willing to return.”

Since the filing last week, Scotiabank has agreed to support Cambridge for up to another year, to ensure the clubs can reopen, Mr. Caldwell said in an interview. Scotiabank declined to comment. Mr. Caldwell said landlords have also consistently told the company they want the clubs to continue operating, but have not forgiven unpaid rent.

Cambridge Group’s landlords are the real estate arm of Brookfield Asset Management Inc. and Cadillac Fairview Corp. Ltd., a division of the Ontario Teachers’ Pension Plan. Brookfield declined to comment.

Companies cannot overcome the COVID-19 crisis on their own,” said Janine Ramparas, director of corporate communications at Cadillac Fairview, in an e-mail. She said: “Cadillac Fairview continues to work with our clients, peers, industry associations and all levels of government to ensure the long-term success of the industry.”

Mr. Caldwell said Scotiabank and the landlords took comfort from continuing support for the fitness clubs from Cambridge Group members. When the facilities closed, the clubs stopped charging members monthly dues that average around $200. However, approximately 20 per cent of members decided to support the club by voluntarily paying their fees, bringing in $865,000 since March.

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