CHICAGO -- Bally Total Fitness, Chicago, has signed a deal with its senior lenders that will allow the company to emerge from Chapter 11 bankruptcy protection. The 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.

Under the restructuring plan, which was filed last Wednesday in U.S. Bankruptcy Court in New York, 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.”

Last December, Bally filed for bankruptcy, the second time it had sought Chapter 11 protection in the span of 17 months. At the end of December, Bally operated 328 clubs in 25 states, a figure that reflected the closing of 19 clubs shortly after the bankruptcy filing. Bally listed assets of $1.16 billion and debts of $1.58 billion.

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