Bally Total Fitness' 9.875% '07 senior subordinated notes plummeted about 26 points to 70 after it announced Thursday afternoon it has hired Jefferies & Co. to help it explore options to restructure its debt, which may include filing for Chapter 11. Its 10.5% '11 senior notes fell about nine points to 91.
"The bonds are getting whacked, there's no question about that," said one trader invested in the term loans. "The flow has been more in the senior piece of paper, but we're definitely keeping a close eye on it." The Chicago-based fitness center operator also delayed filing its 10-K with the Securities and Exchange Commission for 2006 on issues of accounting for deferred revenues. It expects to report a loss from continuing operations for 2006 and that cash collections of membership revenues in 2006 will be about $25 million lower than the previous year. A Bally spokesman declined comment.
Bally has delayed filing forms with the SEC a number of times. Most recently it delayed filing its second quarter 10-Q in August and also received an extension for filings its 2005 financials. It currently has $827 million in debt outstanding, has about $14 million in interest payments on its public notes due in April, July and October of this year, as well as the maturity of its $300 million in 9.875% '07 notes in October, according to a filing with the SEC.
Although the company's bonds have taken a dive, its loans are holding steady and actually traded up a little bit Friday morning, according to a trader. The company tapped the loan market in November for a $280 million credit facility. JPMorgan and Morgan Stanley lead the deal which comprises a $40 million revolver, a $205.9 million term loan and a $34.1 million delayed-draw term loan, all priced at LIBOR plus 4 1/4%. The term loan "B" was trading around 100.875-102 on Friday morning, according to Markit.
Moody's Investors Service downgraded the company's corporate family rating and 10.5% notes to Caa3 from Caa1 Friday morning. The 9.875% notes were downgraded to Ca from Caa3.