Fitness financials: Lenders give Bally $280 million credit, plus Icon, Crocs, Wal-Mart, Costco

Fitness financials: Lenders give Bally $280 million credit. Icon directors buy out majority shares of equity investors. Crocs acquires Jibbitz. Calculation snafu lowers Wal-Mart's same-store sales. Costco reports September sales.

Lenders give Bally $280 million credit
Bally Total Fitness (NYSE:BFT), which warned last month that it may not be able to fulfill its credit agreement, said its lenders had agreed to a credit totaling $280 million. The news shot its shares up 50.1 percent on Oct. 4 — more than four times average daily trading volume on the New York Stock Exchange.

Shares rose as high as $0.88 from previous day’s trading, closing at $2.50. The stock has traded between $1.46 to $9.92 in the past 52 weeks and is down about 73 percent since the beginning of the year.

The new agreement moves the date on which the company’s senior subordinated notes are due to Oct. 15 from April 15, according to the agreement. The lenders are JPMorgan Chase Bank, JP Morgan Securities Inc., Morgan Stanley Senior Funding Inc., Canyon Capital Advisors LLC and Goldman Sachs Credit Partners LP.

In a filing with the U.S. Securities and Exchange Commission, Bally said its lenders had agreed to a term loan of $205.9 million, a delayed-draw term loan of $34.1 million, and a revolving credit facility of $40 million.

In September, Bally posted a second-quarter loss and said it would not have sufficient liquidity to operate its business without an extension of its credit agreement with lenders, or the refinancing of its debt.

Bally has struggled to recover from accounting issues that prompted it to restate five years of financial reports. In August, the company removed its chief executive and said its search for a buyer had been unsuccessful.

Bally also affirmed a forecast it gave on August 11 for 2006 cash contribution to be 10 percent to 20 percent below the $120 million it reported for 2005. The company’s cash contribution represents operating income excluding depreciation and amortization, and unusual items.

Additionally, Standard & Poor’s Ratings Services on Oct. 6 affirmed its ratings on Bally. The agency removed Bally’s “CCC” corporate credit rating and others from CreditWatch and said the outlook is “developing.”

S&P placed the ratings on CreditWatch in December, after the company hired JP Morgan Securities to help explore strategic alternatives.

“Although Bally continues to explore strategic alternatives, the probability of a major infusion of equity to reduce debt is considerably diminished,” credit analyst Andy Liu said in a statement. Total debt outstanding as of June 30 was $723 million.

Icon directors buy out majority shares of equity investors
In a filing with the SEC on Oct. 5, Icon Health & Fitness revealed that company directors and executives Gary Stevenson, Scott Watterson and Robert Gay have bought out most but not all of the stocks owned by equity investors Bain Capital (Bain Entities) and Inverness/Phoenix Partners and Capital Partners (Inverness Entities). Each sold certain of their equity in the company’s indirect parent, HF Investment Holdings LLC, at $50 per unit or $8.5 million total price.

Bain’s interest in the company is now down from 2,580,000 shares to 1,032 shares, while Inverness’ interest is down from 344,000 shares to 172 shares. Together, the buyers’ interest will increase from 3,873,000 shares to 6,795,796 shares on a fully diluted basis.

Crocs acquires Jibbitz
Crocs (Nasdaq: CROX) has entered into an agreement to buy Jibbitz LLC, a family-run business that makes customized versions of Crocs’ brand footwear, for $10 million. Crocs also said it would pay up to an additional $10 million if Jibbitz meets certain performance targets.

Crocs and Jibbitz also struck an endorsement deal, under which Crocs will endorse Jibbitz worldwide and Jibbitz gains access to Crocs’ distribution and retail network. Jibbitz already features over 300 different designs being sold through 4,000 retail accounts both in the United States and Europe.

The acquisition is scheduled to close in December, with the endorsement deal effective immediately. Jibbitz will operate as a wholly owned subsidiary of Crocs following the closing and founders Rich and Sheri Schmelzer will remain with Jibbitz as president and chief design officer, respectively.

Calculation snafu lowers Wal-Mart’s same-store sales
Wal-Mart Stores (NYSE: WMT) slashed its September sales results, saying that about 235 of its stores were incorrectly coded to calculate sales last month. It said sales at its stores open at least a year rose a much weaker 1.3 percent versus an earlier 1.8 percent increase. The company said total sales were not affected.

Costco reports September sales
Costco Wholesale (Nasdaq: COST) reported net sales of $5.56 billion for the month of September, the five weeks ended Oct. 1, 2006, an increase of 8 percent from $5.14 billion in the same five-week period last year. Comparable sales increased 4 percent during this five-week period (3 percent domestically and 12 percent internationally).

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