Bally gets court OK for pre-packaged reorganization plan

By Reshmi Basu

New York, Sept. 17 - Bally Total Fitness Corp. obtained court approval Monday for its disclosure statement and amended pre-packaged plan of reorganization from the U.S. Bankruptcy Court for the Southern District of New York.

Under the reorganization plan, Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund LP will infuse $233.6 million in exchange for 100% of the common equity of the reorganized company.

Since the company filed for bankruptcy protection on July 31, the company has worked to resolve disputes over various leases, according to Bally attorney David Heller of Latham & Watkins.

"This debtor has bent over backwards ... to get a 'yes' from the landlords," Heller told the court.

"The bottom line here is we have a very successful case. With cases like this, we would all be living in much smaller houses," he added.

Under the plan, the company's senior noteholders will receive new senior second-lien notes that pay a 13% interest, accompanied by a consent fee equal to 2% of the face value of the notes they hold.

Subordinated noteholders will receive an immediate cash payment of $123.5 million while the remaining balance will be satisfied through the issuance of $200 million in new subordinated notes.

And existing shareholders and holders of certain other equity-related claims will divvy up $16.5 million.

"We will exit bankruptcy as a stronger company, with a capital structure that will enable us to increase our level of investments in our clubs and pursue other initiatives to add value for our members," said Don R. Kornstein, interim chairman and chief restructuring officer, in a news release.

Meanwhile, Heller said the company expects to complete the transaction with Harbinger by the end of the month.

If the deal falls through, Bally can fall back to the original plan as a backstop, which calls for $90 million in capital to be provided through the issuance of new senior subordinated debt sponsored by Tennenbaum Capital Partners, LLC, Goldman, Sachs & Co. and Anschutz Investment Co.

Bally is a Chicago-based fitness center operator. Its Chapter 11 case number is 07-12395.

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