Bally Total Fitness May File For Chapter 11

Gym operator Bally Total Fitness Holding said on Thursday it may have to file for Chapter 11 bankruptcy protection from creditors if it is unable to restructure its debt.

The company said it has $45 million in cash and $827 million in outstanding debt, adding that it is "exploring a broad range of options" for reducing it.

Chicago-based Bally also said it told the U.S. Securities and Exchange Commission that it is unable to file its annual report for 2006, which is due Friday.

The company said it doesn't know when it will be able to file the report and said it hired Jeffries & Co. as its financial advisor.

Bally also said it expects to post a loss from continuing operations in 2006, with membership revenue falling 3%, or more than $25 million less than 2005.

Bally has been struggling in recent years to attract new members. In 2005, the company put itself on the block, but was unable to find a buyer.

The fitness club chain also said membership collections have continued to fall through the first 11 weeks of this year, a trend that will continue "at least" through 2008, Chief Executive Barry Elson said in a conference call.

Elson said the company's strained finances have prevented it from making much-needed upgrades to its facilities in recent years, making it vulnerable to competitors offering sleeker amenities to consumers.

In order to ease Bally's financial woes, Elson said the company will make layoffs, renegotiate rents and close underperforming clubs.

Bally's stock, which closed up 2 cents at $1.99 on the New York Stock Exchange, has plunged nearly 80% in the last year.