CHICAGO – Bally Total Fitness announced an agreement today with noteholders that brings the company closer to a Chapter 11 bankruptcy filing, which Bally expects to happen “in the near future,” according to a press release.
Noteholders of a majority of Bally’s 10 ½ percent senior notes due 2011 and more than 80 percent of its 9 7/8 percent senior subordinated notes due 2007 have entered an agreement to vote in favor of a restructuring plan.
The reorganization of the company will further enhance Bally’s liquidity by increasing the rights offering from $77.5 million to $90 million and by allowing the company to retain the cash which would have been used for the July 15, 2007 interest payment due on the senior notes.
Bally plans to continue normal club operations and memberships will remain unaffected during the pendency of the anticipated bankruptcy case. Bally will seek to emerge from bankruptcy as quickly as possible, according to the press release.
Don R. Kornstein, interim chairman and chief restructuring officer, said the agreement “will enable us to expedite our work on restoring the strength of our balance sheet in the shortest time possible and positioning Bally Total Fitness to compete over the long term. We look forward to emerging from bankruptcy with a greater ability to invest in and continue upgrading our fitness centers and to focus on building the Bally brand.”
Tennenbaum Capital Partners, LLC, Anschutz Investment Company, and Goldman Sachs & Co., who collectively hold more than 80 percent of the senior subordinated notes, have agreed in principle to subscribe for their pro rata share of the rights offering senior subordinated notes and to purchase any rights offering senior subordinated notes not subscribed for by other holders of senior subordinated notes. As a result of these backstop provisions, Bally will be assured of having $90 million in additional cash availability upon the effectiveness of the reorganization.