CHICAGO -- Bally Total Fitness' stock plunged 17 percent to $3.03 a share following news that it had received notices of default under two bond issues. The notices relate to its senior subordinated notes due in 2007 and its senior notes due in 2011. The company received the notices following the expiration of the waiver of the financial reporting covenant default on July 31. The delivery of the notices imposed a 30-day deadline for Bally to either secure an extension of the waiver or remedy the default.
The company is also facing a 10-day countdown after which time the company will be considered in default under its $275 million secured credit agreement's cross-default provision. According to a press release by the company and a story by Chicago Business, $700 million in debt could become due on Aug. 14.
In related news, The Federal District Court in the Northern District of Illinois recently entered a judgment against Bally Total Fitness and confirmed an arbitration award of $14.3 million. This matter relates to a contractual dispute over a program of transferring membership receivables balances into a credit card program.