Bally Total Fitness seeks default waivers after failing to file financial reports

By Caroline Salls

Pittsburgh, March 24 - Bally Total Fitness Corp. will seek waivers of defaults arising from the company's failure to file its year-end 2005 financial statements with the Securities and Exchange Commission from holders of its 10½% senior notes due 2011 and 9 7/8% senior subordinated notes due 2007, according to a company news release.

Bally said it will also seek a waiver to extend the time for filing its financial statements for the quarters ending March 31 and June 30.

The company said it expects to start the consent solicitation on Monday.

According to the release, holders of about 53% of the 9 7/8% notes have already entered into agreements with Bally to consent to the requested waivers, including Tennenbaum Capital Partners, LLC, the largest holder of the 9 7/8% notes, and entities affiliated with Pardus Capital Management, LLC and Everest Capital Ltd., noteholders that are also large Bally shareholders.

Bally will also seek a waiver from the lenders under its $275 million senior secured credit facility of the requirement to deliver audited financial statements by March 31.

Consent payments

Consenting noteholders will be paid $10.00 in cash or 4.4444 unregistered shares of Bally common stock per $1,000 principal amount of notes, at the consenting party's option.

The 9 7/8% noteholders that have already agreed to consent have elected to receive their consent fee in stock.

If all noteholders elect to receive unregistered common stock, the company will issue a maximum of 2.38 million unregistered shares of common stock.

Bally currently has 38.5 million common shares outstanding.

Consenting lenders under the senior secured credit facility will receive consent fees in cash.

Bally said it expects to sell common stock to some institutional holders to finance the payment of cash consent fees and related expenses.

The senior secured credit facility default waivers are expected to be completed by March 31 and the note indenture default waivers by April 14.

Filing delays

As previously reported, Bally failed to file its financial reports with the SEC because of a delay until Nov. 30 in completing the audit of the 2004 financial statements and the restatements of previous periods.

This contributed to difficulties in updating legacy systems and delays in completing the required testing and management's assessment of its internal controls as required by Section 404 of the Sarbanes-Oxley Act of 2002.

Under the proposed lender and noteholder default waivers, Bally would be required to file its 2005 10-K report no later than July 10, though Bally said it expects to complete the process before then.

The waivers would also permit a delay in the filing of Bally's 10-Q reports for the quarters ending March 31 and June 30 for up to 60 days.

The notes cannot be accelerated until the company receives a default notice from the trustee or holders of at least 25% of the principal amount of the notes and a 30-day cure period has passed.

Bally's senior secured credit facility provides for a cross-default 10 days after delivery of a default notice, which Bally is asking the lenders to extend.

Bally is a Chicago-based health club chain.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.