Fitness financials: Bally noteholders agree to Ch. 11 restructuring plan, plus Everlast, Iconix/Danskin Fitness, Nike
Fitness financials: Bally noteholders agree to Ch. 11 restructuring plan. Second Everlast stakeholder opposes buyout. Iconix to offer $250 million in notes. Nike and Brooks settle logo lawsuit.
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Bally noteholders agree to Ch. 11 restructuring plan
Majority noteholders of Bally Total Fitness’ (Pink Sheets: BFTH) 10-1/2 percent Senior Notes due 2011 and more than 80 percent of its 9-7/8 percent Senior Subordinated Notes due 2007 have entered into a Restructuring Support Agreement with the company, agreeing to vote in favor of Bally’s Chapter 11 reorganization plan.
The plan will enhance the company’s liquidity by increasing the rights offering to $90 million and by allowing it to retain the cash which would have been used for the mid-July interest payment due on the Senior Notes, Bally said.
With the agreement in place, Bally said it has sufficient support from its noteholders to implement its bankruptcy plan and expects to file Chapter 11 in the near future. Bally added that it plans to continue normal club operations until and during the anticipated bankruptcy case and will attempt to emerge from bankruptcy as quickly as possible.
Don Kornstein, interim chairman and chief restructuring officer, said in a statement, “We are pleased to have such strong support for the plan from both our senior and senior subordinated noteholders. The Restructuring Support Agreement will enable us to expedite our work on restoring the strength of our balance sheet in the shortest time possible, and positioning Bally Total Fitness to compete over the long term. We look forward to emerging from bankruptcy with a greater ability to invest in and continue upgrading our fitness centers and to focus on building the Bally brand.”
Second Everlast stakeholder opposes buyout
Galt Investments became the second stakeholder to say it will vote against Everlast Worldwide’s (Nasdaq: EVST) $146 million buyout offer because it believes the price for the boxing equipment maker is too low. Galt owns about 4 percent of the company’s stock.
On June 1, Hidary Group offered $26.50 per share for the company. Aquamarine Capital Management LLC, which owns 2.3 percent of Everlast stock, said June 4 the offer was too low. At the time, the offer was 14 percent over the previous day’s trading price. It is a 5 percent discount to Monday’s closing price.
In a note to the Everlast board, Galt said an auction should have been held in order to maximize the value of any sale. “In particular, we believe that the board of directors did not contact logical strategic buyers, such as adidas, Nike, Puma, Under Armour or others, and instead took an un-shopped, lowball bid from a buyer affiliated with a current Everlast licensee,” wrote Jeff Lick, managing member of Galt.
Iconix to offer $250 million in notes
Iconix Brand Group (Nasdaq: ICON), parent of Danskin Fitness, said it plans to offer $250 million principal amount of convertible senior subordinated notes due in 2012.
Iconix said the initial purchasers will also have an option to buy up to an additional $37.5 million principal amount of notes to cover over-allotments, if any.
It will use a portion of the proceeds to fund a convertible note hedge transaction and a warrant transaction. Any remaining proceeds would go toward investing in or acquiring new brands.
Standard & Poor’s Ratings Services said it cut its ratings outlook on Iconix to “negative” due to the company’s note offering, saying the revision “reflects the company’s more aggressive financial policy.”
S&P also assigned a “B-” or non-investment grade rating to the note offering. Iconix currently has a “B+” corporate credit rating with S&P. That rating is also non-investment grade.
The ratings reflect the company’s “participation in the highly competitive and volatile fashion apparel industry, a high degree of licensing contract renewal risk (a substantial portion of contracts were acquired within the last 12 months), an aggressive acquisition strategy, and ownership of some brands that require revitalization. The ratings also incorporate the lack of track record under Iconix’s relatively new brand management,” S&P said.
Nike and Brooks settle logo lawsuit
Nike (NYSE: NKE) and Brooks have settled a lawsuit over the Tailwind collection logo. Brooks alleged the Tailwind logo was too similar to its own and filed a suit over trademark infringement and unfair competition. The Tailwind line, a product of Nike’s Exeter subsidiary sold exclusively at Payless ShoeSource Inc., was released in February. The terms of the settlement were not disclosed. Nike said it use a revised logo for its Tailwind products going forward.
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