CHICAGO – Bally Total Fitness announced Thursday that it has obtained a forbearance agreement from the lenders under its $284 million senior secured credit facility and that the company will not pay its scheduled interest payment of about $15 million due Monday on its 9 7/8 percent senior subordinated notes.

Under the agreement, the lenders won’t exercise any remedies under their credit agreement as a result of defaults due to Bally’s inability to provide audited financial statements for the fiscal year ended Dec. 31, 2006.

The forbearance period expires July 13 but could expire earlier if enforcement action is taken by any holder of Bally’s 10 1/2 percent senior notes due 2011 or senior subordinated notes, or if the company pays any principal or interest on the senior subordinated notes. The $300 million of outstanding senior subordinated notes mature in October.

Bally also announced that it is in talks with holders regarding waiver and forbearance arrangements of its senior notes and senior subordinated notes. Bally said it does not intend to pay a fee to the holders in connection with the waiver and forbearance arrangements.

As of Wednesday, Bally’s liquidity was about $54 million. Bally officials believe that it has sufficient liquidity to continue operating through the end of this year and into 2008, excluding the potential impact of the maturity of the senior subordinated notes.

“We greatly appreciate the support of our senior lenders, since obtaining their forbearance is an important first step in our effort to seek a consensual restructuring and deleveraging of Bally’s balance sheet,” Don Kornstein, Bally’s interim Chairman, said in a statement. “We look forward to continuing the discussions with our noteholders, as well as completing our 2006 financial statements.”

Today, Bally filed a formal Form 8-K with the United States Securities of Exchange Commission (SEC).

At the close of today's activity on the New York Stock Exchange, Bally’s shares rose 4 cents to 70 cents.