Bally Files For Bankruptcy Again, Up For Sale

Bally Total Fitness, which operates 347 health clubs serving more than 3.1 million customers, filed for bankruptcy protection for the second time in 17 months, and put itself up for sale.

The Chicago-based company and more than 40 affiliates filed for Chapter 11 protection with the U.S. bankruptcy court in Manhattan on Wednesday.

Bally said it has more than $1 billion of both assets and debts, and in excess of 100,000 creditors.

Chief Executive Michael Sheehan in a statement said, "The burden of Bally's long-term indebtedness, coupled with the lack of refinancing options in today's constrained credit markets," left no alternative other than a bankruptcy filing, despite "marked improvement" in Bally's operating results.

Bally first filed for bankruptcy protection on July 31, 2007, and emerged two months later after receiving $233.6 million from hedge fund Harbinger Capital Partners.

It later defaulted under a credit agreement it obtained when it emerged, according to a resolution adopted by Bally's board.

The company said on Wednesday it has received "strong" interest from prospective purchasers and is in "active and advanced" talks with some lenders on an agreement to buy its assets.

It said if it negotiates such an agreement, lenders would provide it with financing to conduct day-to-day operations.

Bally said it can reorganize on its own if it is unable to arrange a sale, and that the bankruptcy process should allow it to significantly reduce debt and streamline operations.

The banking units of U.S. Bancorp and HSBC Holdings  are Bally's largest unsecured creditors, with respective claims of $247.3 million and $231.3 million, according to the bankruptcy petition.

Bally retained Houlihan, Lokey, Howard & Zukin and the law firm Kramer, Levin, Naftalis & Frankel as its advisers.

Harbinger was not immediately available for comment.

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