Bally Emerges From Bankruptcy

CHICAGO – Bally Total Fitness, Chicago, the second-highest revenue-producing health club company in the United States, has emerged from bankruptcy, the company announced Monday.

Bally’s time in bankruptcy lasted only two months after the company filed for Chapter 11 protection on July 31. Harbinger Capital Partners, a New York-based private equity firm and one of Bally’s shareholders, becomes Bally’s new owner after purchasing the company for $233.6 million.

At the time of Bally’s filing for bankruptcy, the company listed assets of $397 million and debt of $761 million. Bally emerges from Chapter 11 protection with access to at least $30 million in cash and a $25 million working-capital credit line through 2011.

Bally now becomes a private company. Its stock quote on the Pink Sheets exchange Monday was 35 cents.

In addition to Harbinger’s ownership, Bally also announced that:

• Senior noteholders will receive new senior second lien notes bearing interest at 13 percent as well as a consent fee equal to 2 percent of the face value of their notes.

• Subordinated noteholders will receive a cash payment of $123.5 million in the aggregate, with the remaining balance of the subordinated notes satisfied through the issuance of approximately $200 million in new subordinated notes of reorganized Bally. The annual interest rate payable under the new subordinated notes is 15 5/8 percent as the payment-in-kind interest rate and 14 percent as the cash pay interest rate.

• Existing Bally shareholders and holders of certain equity-related claims will receive an aggregate distribution of $16.5 million, or about 40 cents a share, after the company can determine the maximum amount of the equity-related claims. That determination cannot be made until after the Oct. 31, 2007, deadline for submission of proofs of claim for equity-related claims, which may require court approval.

In conjunction with its emergence from Chapter 11, Bally converted its debtor-in-possession (DIP) facility to an exit credit facility. Morgan Stanley Senior Funding Inc. is the sole lead arranger and sole bookrunner for the $292 million super-priority secured DIP and senior secured exit credit facilities.

Bally also announced that funds which had been deposited in respect of subscriptions for notes that were to be issued in a rights offering associated with a noteholder-sponsored restructuring plan—which was not consummated—will be returned promptly.