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To: TRIIBoy who wrote (11873)	11/3/1999 1:27:00 PM
From: Walk Softly	Read Replies (2) \| Respond to of 18998

BFT sneaking up on light volume

To: TRIIBoy who wrote (11873)	11/4/1999 12:01:00 PM
From: RockyBalboa	Read Replies (2) \| Respond to of 18998

Trihboy, Here is a bit on BFT which is not as positive as it looks like: Not even double BB, the lowest Investment grade. Thursday November 4, 11:35 am Eastern Time S&P revises Bally Total Fitness Holdings outlook (Press release provided by Standard & Poor's) NEW YORK, Nov 4 - Standard & Poor's today assigned its single-'B'-plus rating to Bally Total Fitness Holding Corp.'s $175 million senior secured credit facility. The facility replaces the company's existing $90 million revolving credit facility expiring November 2000. In addition, Standard & Poor's revised its outlook on Bally to positive from stable. The single-'B'-plus corporate credit rating and single-'B'-minus subordinated debt rating for the company were affirmed. The outlook revision reflects improvement in operating performance and key credit measures, offset by continued high financial risk as reflected in negative free cash flow amid aggressive expansion plans. Bally is the largest health club operator in the U.S., with 360 clubs nationwide and four million members. The company benefits from economies of scale in advertising, centralized membership processing, and service due to its large base of clubs. Although its practice of clustering clubs geographically is a positive, a national player can still be vulnerable to strong regional competitors. Changes in the company's management team have led to a more focused approach to operating the business since late 1996. Steps taken by management include a move away from discounted paid-in-full memberships in favor of company-financed all-club, rather than single-club, memberships. The company's operating performance continued to improve during 1999. Earnings before interest, taxes, depreciation, amortization, and rental expense (EBITDAR) to interest plus rental expense was 1.55 times (x) for the 12 months ended Sept. 30, 1999, versus 1.46x during 1998. Despite the recent improvement in Bally's cash flow position, negative discretionary cash flow remains a concern, particularly as the company stepped up capital spending during 1999. High levels of negative discretionary cash flow are mainly attributable to heavy working capital requirements as a result of aggressive sales of financed membership plans, which result in less cash received up front. In addition, during the first six months of 1999, Bally spent more than $15 million on 16 acquisitions. Bally also recently increased its capital spending targets by $35 million-$40 million a year to build new clubs and upgrade existing facilities. The bank loan rating on the company's credit facility is at the same level as the corporate credit rating. The bank line consists of a $100 million revolving credit facility due 2002 and a $75 million Term Loan B due 2004. The facility is secured by a pledge of substantially all of the company's real estate and personal property, excluding installment contract receivables, which the company sells via a securitization agreement. The security package also includes 100% of the capital stock of each of the company's domestic subsidiaries and 65% of the capital stock of certain of the company's foreign subsidiaries. Standard & Poor's simulated default scenario assumed that the revolving loan facility was fully drawn, and that both cash flow and resale multiples were at distressed levels. The facility derives some value from its secured position. However, the collateral would likely suffer erosion of value if overall company earnings declined in a default scenario. Possible causes of a default scenario could include leveraged acquisitions that prove unsuccessful, competitive factors which restrict the earnings growth of new clubs or even erode existing clubs' earnings, and intensified competition for development sites and acquisition targets as the company enters new markets. Therefore, while the collateral affords bank lenders more protection than senior unsecured creditors would have, it is not clear that a severely distressed enterprise value would be sufficient to cover the entire facility. OUTLOOK: POSITIVE Standard & Poor's expects discretionary cash flow before financing to remain negative over the near term as a result of working capital needs and expansionary capital spending. Longer-term upgrade potential is contingent on Bally's achieving substantial improvement in discretionary cash flow and improving interest coverage to 2.0x, Standard & Poor's said.