Things may be getting shaky for Bally President and CEO Paul Toback. Just two months after getting the Bally Total Fitness board of director's support, that board is now down a second member in not more than a week. Following the resignation of Marilyn Seymann, Bally Total Fitness Holding Corp. (NYSE: BFT) announced on Aug. 26 that Stephen C. Swid had also resigned from the board of directors.
The board's vote of confidence for Toback came in the wake of a series of public letters between Bally and Emmanuel Pearlman of the Liberation Investment Group LLC who was looking for not only the ouster of Toback, but also a spot on the board. He was turned down on both fronts, but as the company continues to experience struggles and turnover, speculation is running rampant about the future of the company and its management.
The company, though, did get some good newsâ€”or, should we say, at least not another piece of totally bad news, which these days for Bally is as good as good news.
Bally announced that it has reached agreement with holders of a majority of its outstanding 9-7/8 percent Senior Subordinated Notes due 2007 to an extension through Nov. 30, 2005 of the waiver of the financial reporting covenant default under the indenture governing the notes. The agreement to consent to the waiver of the financial reporting covenant default under the Subordinated Note indenture is subject to the company receiving a similar waiver extension from the holders of the company's 10-1/2% Senior Notes due 2011 and approval by the lenders under the Company's $275 million senior secured credit facility.
As we previously reported (see SNEWSÂ® story, Aug. 19, 2005 "Bally gets needed covenant and cross-default extensions"), Bally's existing waiver of the financial reporting covenant defaults expired on July 31, 2005. As a result of these notices and a cross- default provision in the company's credit agreement, unless the financial reporting covenant defaults contained in the indentures are waived by the impending deadline of Aug. 31, 2005, over $700 million of Bally's debt obligation under the credit agreement and indentures could become immediately due and payable. In fact, consent of holders of the senior notes to a waiver extension and approval by lenders under the company's credit agreement are still required to waive the defaults or the full debt could still become immediately payable leaving the company and its senior management watching he clock and their backs.