Bally Total Fitness reported that it has emerged from Chapter 11 bankruptcy protection, while Crunch Fitness said it is poised to exit bankruptcy by mid-September as it closes a sale to New Evolution Fitness Co. and another investor.
Bally's reorganization plan was approved last month by the U.S. Bankruptcy Court, Southern District of New York. The company filed for bankruptcy in December 2008 -- its second Chapter 11 filing in less than two years. It emerged from its first bankruptcy in October 2007.
With its reorganization complete, the company said it is reducing its debt by roughly $700 million to less than $100 million. Holders of its secured debt will get 94 percent of the reorganized company's equity, with JP Morgan Chase Bank and Anchorage Advisors to own a majority interest. Bally will issue 3 percent of its equity, along with warrants to acquire an additional 5 percent, to holders of certain unsecured claims.
Bally CEO Michael Sheehan said in a statement, "Bally is moving in the right direction as we continue to systematically improve every aspect of this company. With the dramatic restructuring of our balance sheet and improved financial performance, Bally is now positioned to put 100 percent of our energy toward improving the customer experience and growing our business."
Reportedly, the board members of the reorganized company include former members Sheehan, Eugene I. Davis and Timothy J. Bernlohr, as well as new members Kevin J. Corgan and Michael Kerrane of JP Morgan, Daniel Allen and Aaron N. Rosenstein of Anchorage, and Fredric F. Brace, a retired executive with United Airlines.
Bally was a publicly traded company until about two years ago when it defaulted on its debt, was delisted from the New York Stock Exchange and filed for Chapter 11. It emerged as a private company.
Crunch Fitness said a bankruptcy court judge has approved the $40 million debt facility lined up by New Evolution Fitness and Angelo Gordon & Co., a New York private equity firm.
New Evolution is run by Mark Mastrov, the founder of 24 Hour Fitness, who now runs a venture fund that targets fitness businesses.
Mastrov will become chairman of Crunch Fitness and Jim Rowley, a partner of Mastrov at New Evolution Fitness, will oversee the day-to-day operations as CEO. As part of the company's exit from bankruptcy, current CEO Tim Miller will resign, but act as an advisor to the company.
Angelo Gordon acquired the company assets in October 2005 from Bally Total Fitness. Crunch reportedly went into bankruptcy partly because of leases it inherited from Bally. New Evolution Fitness and Angelo Gordon were senior lenders to Crunch Fitness, which listed both assets and liabilities at between $100 million and $500 million, respectively, in its May bankruptcy filing.