CHICAGO—After months of speculation about a possible bankruptcy filing, Bally Total Fitness Holding Corp. says it plans to file Chapter 11 restructuring.
The company announced the plans today after holders of more than 80 percent of its 9.875 percent senior subordinated notes agreed in principle to swap $150 million of the notes, which will mature this year, for new subordinated notes, common equity and the right to participate in a $77.5 million rights offering. Bally must get consents from other bondholders before filing for Chapter 11.
The restructuring will reduce the principal outstanding on the company’s existing senior subordinated notes by $150 million.
Stockholders will not receive anything for their shares, the company says.
“This agreement in principle with the consenting senior subordinated noteholders lays the foundation for a restructuring process that will enable us to invest in our clubs and upgrade our business model to provide a superior fitness experience for our 3.5 million members and a top-quality work environment for our 20,000 employees,” says Don Kornstein, Bally’s chief restructuring officer and interim chairman.
The company’s announcement indicated that Bally would complete the reorganization within 60 days of the bankruptcy filing. It will continue normal club operations during the restructuring process and will emerge from Chapter 11 no longer subject to public reporting obligations.
The company also says it expects to file its 2006 annual report by the end of June.