Bally gets needed covenant and cross-default extensions

Bally Total Fitness Holding Corp. (NYSE: BFT) has announced it has not only received an extension relating to waivers of financial reporting covenant defaults, but also of its cross-default deadline relating to Bally’s financial reporting covenant defaults under its public bond indentures.

The first extension is only through Aug. 25, at 5 p.m. ET, while the second, which came from consent from the lenders under its $275 million secured credit agreement, is extended to Aug. 31, 2005.

These short reprieves allow the company a breather as it tries to find ways to keep its head above water. Without the cross-default extension, it could have faced the need to immediately pay back more than $700 million in debt as early as Aug. 14, 2005.  

As previously reported in SNEWS®, the company received default notices under its indentures that would have triggered a cross-default under Bally’s credit agreement on Aug. 14, 2005, making the full weight of Bally’s debt almost unbearable for the struggling company. (See SNEWS® story, July 25, 2005, “Bickerin’ at Bally’s as Liberation Group looks for changes at the top.”) As a result of the consent from the lenders under the credit agreement, the cross-default deadline has been extended until Aug. 31, 2005.

Of course, like many stays, this one is only a temporary fix for one of Bally’s many problems. After that date, unless the indenture financial reporting covenant defaults are cured or waived — neither of which is a sure bet, an industry insider told SNEWS®, more than $700 million of Bally’s debt obligations under its credit agreement and indentures could become immediately due and payable.

The company said that it continues to negotiate with note holders to secure an extension of the financial reporting covenant default waiver, and has received consent from holders of 96.33 percent of the Senior Notes and 42.83 percent of the Senior Subordinated Notes.

The company also announced that it has paid the previously announced judgment confirming an arbitration award against the company of approximately $14.3 million, relating to a contractual dispute arising from a program of transferring membership receivables balances into a credit card program.

In the book of if-it’s-not-one-thing-it’s-the-other, Marilyn Seymann stepped down from the company’s board of directors. Seymann, who was appointed to the board in May, cited her new position as associate dean of Arizona State University Law School as the reason for her departure.

It is unclear at this time what the company will do to replace Seymann or if Bally can expect a letter from Emmanuel Pearlman of the Liberation Investment Group LLC, who recently was turned down for a position on the board after throwing his hat in the ring through a series of public letters.

For the consent solicitation, Bally has retained Deutsche Bank Securities Inc. to serve as its solicitation agent and MacKenzie Partners Inc. to serve as the information agent and tabulation agent. Questions about the terms of the consent solicitation should be directed to Deutsche Bank Securities Inc., 60 Wall St., 2nd Floor, New York, NY 10005, Attention: Christopher White. The solicitation agent may be reached by telephone at 212-250-6008. Requests for documents may be directed to MacKenzie Partners Inc., 105 Madison Ave., New York, NY 10016, Attention: Jeanne Carr or Simon Coope. The information agent and tabulation agent may be reached by telephone at 212-929-5500 (call collect) or 800-322-2885 (toll-free).