AOL Money & Finance

Bally Total Fitness mulls Chapter 11

More

Battling a huge debt load and rising costs, Bally Total Fitness (NYSE:BFT)admitted that it would consider filing for Chapter 11 bankruptcy protection, in a note accompanying its SEC filing indicating that it would not be filing its 10-K for 2006 on schedule. Ouch. On March 12th, the company recognized the need to take an impairment charge of roughly 36 million dollars to reflect the declining returns of past leasehold improvements. The company is also battling past shareholders, as it faces class-action lawsuits stemming from the company's poor performance. The company has 45 million dollars in cash, compared with 827 million dollars in debt.

Bally may look interesting with a price to sales ratio 0.08, but there is an overwhelming amount of risk and uncertainty. According to the NT 10-K: ...The Company's management is assessing the effectiveness of its internal control over financial reporting as of December 31, 2006. The portion of the assessment completed to date has led management to conclude that there were material weaknesses in the internal control over financial reporting as of December 31, 2006. After management completes its assessment, the Company will include the assessment in the 2006 Form 10-K...

And then the real killer:

the response of creditors, customers and suppliers, including financial intermediaries such as credit card payment processors, to the filing of this notification and the matters discussed therein, particularly as those matters relate to liquidity, the uncertain timing of the filing by the Company of its 2006 Form 10-K and the presence of an explanatory paragraph in the audit report on the Company's consolidated financial statements indicating that substantial doubt exists as to the Company's ability to continue as a going concern and other actions the Company may take to restructure or reorganize its obligations, including a reorganization of its operations under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11")

While past investors in BFT may claim that they were misled about the company's prospects, it appears that the company is now giving investors the dismal prognosis as they see it. Any investor who decides to sign up BFT has no one but himself to blame if it doesn't work out.

Reader Comments (Page 1 of 1)

Symbol Lookup
IndexesChangePrice
DJIA+23.8110,457.52
NASDAQ+5.562,174.74
S&P 500+3.041,108.69

Last updated: November 25, 2009: 12:39 PM

BloggingStocks Exclusives

Hot Stocks

DailyFinance Headlines

Latest from BloggingBuyouts

TheFlyOnTheWall.com Headlines

BioHealth Investor Headlines

WalletPop Headlines

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

BloggingStocks Partners

More from AOL Money & Finance

WalletPop Headlines