CHICAGO -- Bally Total Fitness, Chicago, will close 26 clubs by June 26 after it canceled several leases with landlords across the country. The closures are part of a restructuring deal that will allow Bally to emerge from Chapter 11 bankruptcy protection.
A majority of the clubs will close by June 23, with the rest closing over the following three days, says Larry Larsen, Bally spokesperson.
“As part of the reorganization process, we evaluate all of our leases at current locations and tried to negotiate with our landlords to the terms of those leases,” Larsen says. “Where we couldn’t come to terms, we are ending those leases.”
The 26 clubs that will soon shut down brings the total number of clubs that have closed since Bally filed for bankruptcy in December to 47. The first 21 clubs that closed after the filing—including two that closed last month in the Dayton, OH, area—are part of a review of Bally’s real estate portfolio, Larsen says. After the current round of closings, Bally will have around 300 clubs in operation.
Two Bally clubs will close in the Kansas City, MO area. The Indian Creek club that will close in Overland Park, KS, will become a Midtown Athletic Club, says Steven Schwartz, CEO of TCA Holdings, which operates Midtown Athletic Clubs. Midtown currently owns the building that includes the Bally club and a Midtown Tennis Club.
“We are going to be reopening the location on July 1 as part of a Midtown Athletic Club, expanding our Midtown Tennis Club with the addition of fitness,” Schwartz says. “We’re hoping all the members who really enjoyed the Indian Creek location decide to stay with us.”
The state most affected by the closings is Texas. The Dallas-Fort Worth area will lose six clubs, and Houston will lose three clubs. The New York, Boston, Seattle and Indianapolis areas will lose two clubs each. The remaining clubs that will close are in the Atlanta, Chicago, Los Angeles, Cleveland, Portland, OR, Charlotte, NC, and Hartford, CT, markets. Bally is not moving out of any markets entirely, Larsen says.
Members of the clubs that are closing will be receiving complimentary upgrades worth $250 that allows them to use any Bally nationwide. Members also can call 888-210-4725 for more information.
Under Bally’s restructuring plan, which was filed June 10 in U.S. Bankruptcy Court in New York, Bally’s senior lenders, including J.P. Morgan Chase & Co. and Anchorage Advisors LLC, will provide financing and cut Bally’s debt by at least $660 million. Secured lenders who are owed $242 million will get 94 percent of the reorganized company’s equity. Three percent of the equity will be given to management, and the remaining 3 percent will go to pay noteholders and unsecured creditors, according to the plan.
JP Morgan and Anchorage Advisors, which are providing a $39 million loan to finance the restructuring, will essentially become the new owners of Bally, although sources say both companies could sell their stakes once they recoup their losses. JP Morgan will receive a 50.5 percent stake in the company, and Anchorage Advisors will receive a 33.7 percent stake, according to court documents.
A hearing is set for July 15 in bankruptcy court. The agreement requires court approval by July 30 and plan confirmation by Sept. 15.
“Bally is poised to exit Chapter 11 later this summer, and our future looks extremely bright,” Bally CEO Michael Sheehan said in a statement sent to Club Industry’s Fitness Business Pro. “The reorganized Bally will be a stronger, leaner organization with a healthy balance sheet and working capital that can be deployed to fund new club development and improvements, as well as important technology enhancements, all of which will help Bally attract and retain members. We are very excited about the opportunity for Bally to grow and enhance our brand from this point forward.”
Larsen says Bally plans to open at least one new club later this year and is evaluating additional locations in 2010 and beyond.
Bally’s December filing, in which it listed assets of $1.16 billion and debts of $1.58 billion, was the second time in the span of 17 months that the company had sought Chapter 11 protection. Bally emerged from its first bankruptcy in October 2007 under the control of Harbinger Capital Partners, one of Bally’s shareholders, which purchased the company for $233.6 million.
The names and the locations of the Bally clubs that will close by June 26 are:
Arlington (Arlington, TX)
Mayfair (Hurst, TX)
Turtle Creek II (Dallas)
Ridgemar Mall (Fort Worth, TX)
Richardson II (Richardson, TX)
Carrollton (Carrollton, TX)
Village Place (Houston)
West University (Houston)
Woodwinds (Spring, TX)
Lowell (Lowell, MA)
Woburn (Woburn, MA)
Westbury (Carle Place, NY)
New Rochelle (New Rochelle, NY)
North Seattle (Seattle)
Renton (Renton, WA)
Greenwood (Greenwood, IN)
Indian Creek (Overland Park, KS)
Hilltop (Kansas City, MO)
Gwinnett (Duluth, GA)
Tinley Park (Tinley Park, IL)
Corona (Corona, CA)
Strongsville (Strongsville, OH)
Sports Center (Raleigh Hills, OR)
South Boulevard (Charlotte, NC)
Hamden II (Hamden, CT)