Capital Markets

Bondholders Give Bally a Breather

Last month the company said it will restate its financials from 2000 through 2003 and the first quarter of 2004, adding that KPMG will re-audit the...
Stephen TaubDecember 10, 2004

Bondholders of Bally Total Fitness Holding Corp. have given the company more time to sort out its financial problems, even though they could have deemed the gym operator in default.

The company said it has received and accepted consents from the holders of a majority of its 10.5 percent senior notes due 2011 and 9.825 percent senior subordinated notes due 2007 to a limited waiver, which may extend until as late as July 31, 2005, of any default arising from the company’s failure to file its financial reports on time.

In March, the company announced that it would restate its results stemming from the timing of recognition of prepaid dues. In addition, Ernst & Young resigned as its accounting firm — without accounting, reporting, or auditing disagreements with Bally, according to the company — and was replaced by KPMG. In April, Bally announced that the Securities and Exchange Commission had launched an investigation related to the restatement and that John W. Dwyer resigned as chief financial officer.

And in November, the company said it will restate its financials from 2000 through 2003 and the first quarter of 2004, adding that KPMG will re-audit the financial statements for 2002 and 2003 previously audited by Ernst & Young.

Last week, Bally said it doubled the fee it would pay to the bondholders for the default waiver, to $5 per $1,000 principal amount of the notes.

The waiver gives Bally until May 31, 2005, to file audited financial statements, according to Dow Jones, citing a source familiar with the terms of the consent solicitation. If the company does not file the financials by then, the agreement allows for as many as two one-month extensions, each for an additional $2.50 per $1,000, according to the wire service.