CHICAGO — Bally Total Fitness made it official last month: The second-largest revenue-producing club company in the industry filed for Chapter 11 bankruptcy.

The filing by Chicago-based Bally and more than 40 of its affiliates took place in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan.

Court papers show that Bally listed $396.8 million of assets and $761.3 million of debt as of Dec. 31, 2006, according to a report by Reuters.

Bally received enough votes from holders of its 10 1/2 percent senior notes due 2011 and its 9 7/8 percent senior subordinated notes due 2007 to go forward with the reorganization plan that it announced on May 31. If confirmed, the plan will restructure and reduce Bally's debt, strengthen its cash position and provide greater financial flexibility, the company says.

The reorganization plan will reduce the debt on the senior subordinated notes by $150 million, reduce cash interest expense by as much as $29 million per year and provide Bally with $90 million in capital through a rights offering backed by affiliates Anschutz Investment Co., Goldman Sachs Group Inc. and Tennenbaum Capital Partners LLC, who collectively hold more than 80 percent of the senior subordinated notes. Stockholders, including Liberation Investment Group and Harbinger Capital Partners, who proposed an alternate restructuring plan that was rejected by Bally, will receive nothing for their shares as the company goes private.

Bally has lined up $292 million of financing with Morgan Stanley Senior Funding Inc. to fund operations during and after bankruptcy proceedings. The company says that it expects to emerge from Chapter 11 “as promptly as possible.”

The court granted Bally's motions to continue normal club operations and member services during the restructuring process, including the payment of vendors and employee salaries and benefits without interruption. However, Michael Scott Scudder, owner of the online consulting firm MSS FitBiz Connection, says on his Web site that Bally likely will close dozens of clubs and lay off a significant number of employees upon its filing for bankruptcy.

According to Reuters, court papers show that among the Bally affiliates that are reorganizing is Jack LaLanne Holding Corp., named for the fitness and nutritional expert.

Jeffries & Co. is serving as a financial advisor, and the law firm Latham & Watkins LLP is the legal advisor for Bally during the bankruptcy process. A committee of Bally bondholders has retained Houlihan Lokey Howard & Zukin Capital as its financial advisor and the law firm Akin Gump Strauss Hauer & Feld LLP as its counsel.

More information about Bally's Chapter 11 filing is available at www.ballytotalfitness.com and from the company's Chapter 11 Web site, www.kccllc.net/bally.