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Bally Total Fitness set to emerge from bankruptcy

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On August 1, 2007, BloggingStocks' Peter Cohan reported on Bally Total Fitness' decision to file for Chapter 11 bankruptcy protection. Now, almost two years -- and a second bankruptcy filing -- later, the company is set to emerge with senior lenders as the new majority shareholders.

The Wall Street Journal reports (subscription required) that "Under the plan, which requires court approval, secured lenders owed $242 million will get 94% of the reorganized company's equity. The rest will be used in part to pay noteholders and unsecured creditors, which will see a recovery of no more than 1.5%."
The timing for the emergence from bankruptcy isn't exactly great: Health club memberships are about as discretionary as it gets, and the current recession has turned the long-term trend of growing gym memberships negative. The company will emerge from bankruptcy protection without the crippling debt load that drove it there, but it will still be short on the cash needed to compete in this extremely competitive market: With the IPO market still looking extremely weak, the company probably won't have access to much cash for awhile.

Two bankruptcies in two years, and now the company is emerging again -- no doubt with rosy forecasts of a return to glory to follow. If there is ever a publicly traded component to this turnaround effort, I'd be skeptical.

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Last updated: November 25, 2009: 11:09 PM

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