Did you hear?...Bally Total Fitness files for Ch. 11 reorganization – again

For the second time in less than 17 months, Bally Total Fitness has entered the bankruptcy court pipeline with another Ch. 11 bankruptcy reorganization – the first of which in mid-2007 culminated more than two years of company decline and stockholder bickering under past management.
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For the second time in less than 17 months, Bally Total Fitness has entered the bankruptcy court pipeline with another Ch. 11 bankruptcy reorganization – the first of which in mid-2007 culminated more than two years of company decline and stockholder bickering under past management.

This latest filing, in the U.S. Bankruptcy Court, Southern District of New York, on Dec. 3 listed over $1 billion in both assets and liabilities (the largest number that can be checked on the initial form filed with the courts) and more than 100,000 creditors – too large of a debt to hurdle, especially in the current credit crunch. Its filing in July 2007 had been announced in advanced after management changes. (Click here to read a June 1, 2007 SNEWS® story, “Bally to file Ch. 11 bankruptcy plan in July; buyers circle.”)

Bally emerged from its 2007 filing on Oct. 1, 2007 as a private company under restructuring arrangements funded by Harbinger Capital Partners Master Fund I Ltd and its Special Situations Fund. At that time it was reported that Harbinger had invested $233.6 million in exchange for all common equity. But since that transition Bally was still plagued by troubles, with the Securities and Exchange Commission investigating the company as late as spring 2008 while declining to reveal the reason (Click here to read a Feb. 29, 2008 SNEWS story, “SEC continues Bally investigation.”)

The company’s troubles, however, began several years earlier when, under the management of CEO Paul Toback, its financial walls began to crumble, leading to multiple quick and quiet exits by executives and members of the board of directors, public sparring by leading stockholders with Toback, vitriolic letter-writing campaigns and losing court battles. (Click here to read a Dec. 12, 2005 SNEWS story, “Bally and stockholders spar in court, by letter, … let us count the ways,” and click here to read an Aug. 5, 2005 story, “Things get tougher for Bally: Judge rules against company.”)

In a blog on the New York Times story page (Click here to see those entries), voices were raised for and against the company as well as pro and con its future in light of the nation’s continuing economic downturn.

On the blog, one woman, identifying herself as a trainer at the company named “Tamika,” expressed the real human downside of this bankruptcy case: “As an employee in the company who loves her job as a trainer I am saddened by this news. If this company goes out, so will thousands of jobs.

“From my view on the inside, I get the impression that the current CEO couldn’t care less about his people or this company. The way things are being run we are DOOMED. It’s a shame because this is a great company that has great people working for it. It’s not all the bad that you hear.”

As of Dec. 4, the court had not set deadlines for Bally to file its statements of financial affairs, although the company has requested an additional 30 days -- or 45 days from its filing date. Motions to continue operations and use cash collateral to pay employees and to continue business were approved on an interim basis with another hearing slated for Dec. 9.

--Therese Iknoian

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