Bally Total Fitness has obtained a forbearance agreement from the lenders under its $284 million senior secured credit facility.
Under the agreement, the lenders have agreed, among other things, to forbear from exercising any remedies under their credit agreement as a result of defaults due to the company's inability to provide audited financial statements for the fiscal year ended Dec. 31, 2006 and certain other financial information to the lenders. The lenders have also agreed not to exercise cross-default remedies as a result of defaults under the Company's public indentures due to the company's previously disclosed inability to timely file its 2006 Annual Report on Form 10-K with the Securities and Exchange Commission and the company's non-payment of interest on its 9-7/8% Senior Subordinated Notes due 2007 discussed below.
The forbearance period expires on July 13, 2007, but could expire earlier if enforcement action is taken by any holder of the company's 10-1/2% Senior Notes due 2011 or Senior Subordinated Notes, or if the company pays any principal or interest on the Senior Subordinated Notes.
Can't Make Interest Payment
Among other considerations, including this provision of the forbearance agreement, the scheduled interest payment of approximately $15 million due on the Senior Subordinated Notes on April 16, 2007 will not be paid. The forbearance agreement also requires that the Company enter into forbearance agreements with respect to defaults under its public indentures with holders of at least a majority of the Senior Notes and at least 75% of the Senior Subordinated Notes by no later than May 14, 2007.
Bally also said that it is in continued discussions regarding waiver and forbearance arrangements with holders of its Senior Notes and Senior Subordinated Notes. The company has been advised that certain holders of both series of notes have formed an Ad Hoc Committee and retained Houlihan Lokey Howard & Zukin Capital Inc. as financial advisor and Akin Gump Strauss Hauer & Feld LLP as counsel.
The Company and its advisors have met with the advisors to the Ad Hoc Committee and with certain noteholders that have executed confidentiality agreements, and are discussing the terms of waiver and forbearance arrangements. The failure to make the scheduled interest payment on the Senior Subordinated Notes will be a default under the indenture governing those notes and a cross-default under the indenture governing the Senior Notes. The company is in the process of requesting that holders of the Senior Subordinated Notes and Senior Notes waive the indenture financial reporting covenant defaults discussed above and forbear from exercising any remedies with respect to the interest payment default until July 13, 2007. The company does not intend to pay a fee to the noteholders in connection with these waiver and forbearance arrangements. The $300 million of outstanding Senior Subordinated Notes mature in October 2007.
As of April 11, 2007, the company's liquidity was approximately $54 million. The company continues to believe that it has sufficient liquidity to continue operating its business through the end of 2007 and into 2008, excluding the potential impact of the maturity of the Senior Subordinated Notes.
Form 10-K Filing
The company is continuing to work diligently to complete its financial statements for 2006 and file its Annual Report on Form 10-K report for the year ended Dec. 31, 2006.
Don R. Kornstein, Bally's interim Chairman, said, "We greatly appreciate the support of our senior lenders, since obtaining their forbearance is an important first step in our effort to seek a consensual restructuring and deleveraging of Bally's balance sheet. We look forward to continuing the discussions with our noteholders, as well as completing our 2006 financial statements."
About Bally Total Fitness
Bally Total Fitness (NYSE: BFT) -- http://www.ballyfitness.com/ --
is among the largest commercial operators of fitness centers in the U.S., with nearly 390 facilities located in 29 states, Mexico,
Canada, Korea, China and the Caribbean under the Bally Total Fitness(R), Bally Sports Clubs(R) and Sports Clubs of
Canada(R) brands. Bally offers a unique platform for distribution of a
wide range of products and services targeted to active, fitness-conscious adult consumers.
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