Bally set to emerge from Chapter 11

Bally Total Fitness Holding Corp., the gym operator that lasted only 14 months outside Chapter 11, filed a reorganization plan last week proposing to give 94 percent of the new stock to pre-bankruptcy term-loan lenders.

The plan is supported by all of the revolving-credit lenders and 90 percent of the term-loan creditors. The plan is designed to cut debt by $660 million. Unsecured creditors are to split up 3 percent of the new stock.

On entering Chapter 11 again, Bally's debt included $291 million owing to first-lien lenders on a term loan, revolving credit, and letters of credit. Second-lien senior notes were $247 million while $231 million was owing on subordinated notes.

Emerging from reorganization, Bally, which began in Chicago, will have a $50 million revolving credit and $46.5 million in term loans. The $80 million deficiency claim of the term-loan lenders will be waived if unsecured creditors vote in favor of the plan.

Unsecured creditors are estimated to see a recovery between 0.8 percent and 1.5 percent from having 3 percent of the new stock and warrants for another 5 percent. Unsecured debt includes the $247 million in senior notes, as much as $475 million in general unsecured claims, and $231 million in subordinated notes.

The disclosure statement explaining the plan predicts the reorganize company's enterprise value will have a midpoint value of $215 million while the equity value is estimated at $162 million.

Bally filed a motion last week asking the bankruptcy court for approval of an agreement calling for the revolving credit and term-loan lenders to support the plan. The agreement requires bankruptcy court approval by July 30 and plan confirmation by Sept. 15. The plan support agreement is scheduled for a July 15 hearing in bankruptcy court in New York.

Bally's first reorganization, completed in 48 days, gave existing stockholder Harbinger Capital Partners all the new stock in exchange for a $233.6 million cash investment. The new petition filed in December listed assets of $1.38 billion against debt totaling $1.54 billion.

Bally began the second reorganization with 349 facilities serving 3.1 million members under the names Bally Total Fitness and Bally Sports Clubs.

The new case is Bally Total Fitness of Greater New York Inc., 08-14818, and the prior case is In re Bally Total Fitness of Greater New York Inc. Holding Corp., 07-12395, both in U.S. Bankruptcy Court, Southern District of New York (Manhattan).