CHICAGO — Bally Total Fitness announced Friday that it will file for Chapter 11 bankruptcy.
The second-highest revenue-producing fitness club company in the country has received the necessary votes from its noteholders who favor the reorganization plan. More than 99 percent of the holders of Bally’s 10 1/2 percent senior notes due 2011 and 78 percent of the holders of its 9 7/8 percent senior subordinated notes due 2007 voted for the plan. Friday marked the deadline for the voting.
Bally also announced Friday that it has rejected a proposed plan from shareholders Liberation Investment Group and Harbinger Capital Partners. Liberation is Bally’s second-largest shareholder.
“The company has been unable to reach agreement on an alternative restructuring proposal put forth by certain shareholders and has determined that the prompt filing of the plan in bankruptcy court is appropriate,” Bally said in a statement. “The company has informed these shareholders that it is prepared to continue discussions on their proposal.”
Bally’s reorganization plan extinguishes equity, rendering stock in the company worthless, which will then lead to the privatization of the company. In detail, the plan will reduce the principal outstanding on the senior subordinated notes by $150 million, reduce cash interest expense by as much as $30 million per year and will provide Bally with $90 million in capital through issuance of new senior subordinated notes.
Bally also reiterated that it will continue normal club operations and member services throughout the pendency of the bankruptcy case.