Hong Kong gym chain Physical had HK$1 million in accounts but owed HK$10 million in bank loans

Defunct Hong Kong fitness chain Physical had around HK$1 million in its bank accounts when it closed last month but owed more than HK$10 million in loans secured under a government-back pandemic relief scheme, the Post has learned.

Rent had also gone unpaid at some branches before the 38-year-old gym operator’s abrupt closure in September triggered thousands of complaints related to HK$190 million of prepaid services, authorities said.

A source said on Monday that apart from equipment in its now-closed branches, a preliminary investigation showed the operator had no fixed assets. The government may have to settle the outstanding loans it guaranteed for Physical under the scheme if the firm fails to repay the banks.

“The money in the bank accounts might not have been sufficient to cover the monthly rent for one branch,” the insider said.

A Hong Kong couple had served as directors of about 10 Physical-related companies that ran 19 fitness and beauty centres, which closed down on September 6. The Post learned there was very little money in some bank accounts of these companies.

During the Covid-19 pandemic, the companies had borrowed money from banks under the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme.