Bally Total Fitness Holding announced that it has filed a “prepackaged” reorganization plan with the U.S. Bankruptcy Court.
The struggling chain of fitness clubs said it received support from more than 99 percent of the holders of its 10-1/2 percent senior notes due 2011 and from more than 98 percent of holders of its 9-7/8 percent senior subordinated notes due 2007.
If confirmed, the “pre-pack” plan will restructure and substantially reduce the company’s debt, strengthen the company’s cash position and provide greater financial flexibility, the company stressed. Specifically, the plan will reduce debt by $150 million and reduce interest expense by as much as $29 million per year.
It also will provide the company with $90 million in capital through the issuance of new senior subordinated notes in a rights offering backstopped by Tennenbaum Capital Partners, LLC and Anschutz Investment Company, as well as Goldman Sachs & Co. These investment groups hold more than 80 percent of the senior subordinated notes.
Bally said it expects to emerge from Chapter 11 “as promptly as possible.”
“The chapter 11 financial restructuring enables us to strengthen our balance sheet, while providing us with capital to make necessary investments in our clubs and facilities to better serve our valued members, as well as attract new members,” said Don R. Kornstein, Bally’s interim chairman and chief restructuring officer.
The company said it will continue normal club operations and member services during its restructuring process. Back in late June, we reported that Bally began seeking approval from noteholders for its prepackaged bankruptcy reorganization plan and set July 27 as the deadline for a vote.
On Thursday, Bally announced that the U.S. Bankruptcy Court granted substantially all of its “first day” motions on terms announced in open court. Included among the motions granted by the Court are those which permit Bally to continue to pay wages, salaries and employee benefits, and directing banks to receive, process, honor and pay all checks presented for payment and electronic payment requests for those purposes.
The Court also entered an order authorizing Bally to pay vendors’ prepetition general unsecured claims in the ordinary course of business, and authorized the continued use of the Company’s existing cash management system and maintenance of its existing bank accounts.
“The Court’s rulings allow Bally to continue to operate our clubs business as usual,” said Kornstein.