Bally Aims for Chapter-11 Fitness

Agreement with subordinated note-holders could pave way for a restructuring that starts next month and is completed 60 days later.
Stephen TaubJune 4, 2007

Bally Total Fitness said it agreed to a restructuring deal with a majority of holders of its senior subordinated notes as part of a pre-packaged Chapter 11 bankruptcy filing.

The embattled operator of fitness centers said the restructuring will reduce the principal outstanding on the notes by $150 million by exchanging all existing paper for a new class of subordinated notes, common equity and the right to participate in a $77.5 million rights offering.

Investors approving the deal include affiliates of Tennenbaum Capital Partners LLC, Goldman Sachs & Co., and Anschutz Investment Co.

Don R. Kornstein, Bally chief restructuring officer and interim chairman, said the arrangement will reduce the company’s annual cash interest obligations by about $29 million. “This agreement…lays the foundation for a restructuring process that will enable us to invest in our clubs and upgrade our business model to provide a superior fitness experience,” he added in a statement.

The Chapter 11 filing is conditioned upon, among other things, approval by two-thirds in principal amount of the company’s 10-1/2 percent senior notes, due 2011, and a majority in number of the notes’ holders who vote on the plan. Bally said it expects to begin soliciting votes in mid-June, and that if the necessary votes are received, the restructuring would begin in July.

The company, which also said it anticipates filing its 2006 annual report by the end of this month, expects to complete its reorganization within 60 days of filing its bankruptcy petition.