Bally gets court OK on investment plan with Harbinger

By Reshmi Basu

New York, Aug. 21 - A federal judge Tuesday approved Bally Total Fitness Corp.'s $233.6 million restructuring proposal from Harbinger Capital Partners Master Fund I Ltd. and Harbinger Capital Partners Special Situations Fund LP.

As part of an amendment to the company's joint pre-packaged reorganization plan, Harbinger will invest $233.6 million in exchange for 100% of the common equity of reorganized Bally.

The plan is a superior restructuring proposal to the original plan, said Bally attorney David Heller of Latham & Watkins. And it provides for better treatment for all creditors, not just bondholders, he told the court.

Furthermore, he noted that the deal was the result of three-party negotiations, which included the holders of about 80% of the company's senior subordinated notes and more than 55% of the company's senior notes.

As reported earlier, the annual interest rate payable under the senior notes would be increased to 13% from 12 3/8%, with corresponding increases in the premiums payable for early redemption.

Subordinated noteholders would receive an immediate cash payment of $123.5 million, with the remaining balance of the subordinated notes to be satisfied through the issuance of $200 million in new subordinated notes.

The annual interest rate payable under the new subordinated notes would be increased by 200 basis points to 15 5/8% for the payment-in-kind interest rate and 14% for the cash interest rate.

Holders of Bally's existing common stock would receive $16.5 million, compared with no distribution scheduled under the original plan.

Meanwhile if Bally chooses a proposal other than Harbinger's, the hedge fund firm will receive a $10 million break-up fee and up to $5 million in expense reimbursement.

If the Harbinger deal does not close, Bally's would fall back to the original deal as a backstop, Heller added.

The original plan calls for $90 million in capital to be provided through the issuance of new senior subordinated notes in a rights offering backstopped by funds managed by Tennenbaum Capital Partners, LLC, Goldman Sachs & Co. and Anschutz Investment Co.

In addition, Bally said the new proposal helps the company to exit bankruptcy as soon as possible. The company has set a target date of Sept. 17, the date of the confirmation hearing.

In approving the motion, judge Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York said the deal was the result of arms length negotiations and that the process had been very transparent.

"Obtaining the court's authorization to amend our plan, without requiring resolicitation of plan acceptances, is a significant accomplishment and marks the beginning of a new era for Bally Total Fitness," said Don R. Kornstein, interim chairman and chief restructuring officer, in a company release.

Bally, a Chicago-based fitness center operator, filed for bankruptcy on July 31. Its Chapter 11 case number is 07-12395.

© 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.