FWIW, a prognosis from the Yahoo message board devoted to the stock...--------
How I think this will play out:
1) In 60 days, without a sign the hedge funds can find a buyer, stock will trade sub-$1.
2) Citing creditors not extending credit and cash flow crunch, we will wake up one morning to find that BFT filed Ch. 11.
3) New debtor in possession financing of about $500 million will be put in place.
4) About 10-20% of staff will be laid off. Management will get fat retention bonuses. BK judge will approve approximately $1-2 million per month in legal and advisory fees, sucking cash, 24-36 million out of this thing before it emerges.
5) Using BK court, they will cancel approximately 20% of existing leases in unprofitable locations, moving decent equipment to other stores, and selling rest for nothing. These landlords will join debtholders in line with hands out.
6) Also
using BK court protection, they can cancel any contracts that are not favorable. There goes about 25% of their membership paying less than $15-20 per month. These people who paid huge up front fees are screwed, but so be it. This gets rid of the most heavy users of clubs, who pay the least, and removes overcrowding in busier locations, which is a good thing.
7) After 18 months, they emerge from bankruptcy. Shareholders, as is almost ALWAYS the case, get nothing, and shares are cancelled. All of the credtiors, including both classes of non-secured debt, receive over $.80 per dollar in new stock, which will trade under a new symbol. The debtor in possession is paid off with about $400 million in secured debt.
Management gets paid even more money for successfully taking the company through BK, including significant portions of restricted stock and options. Company is leaner, with significantly less debt that doesn't come due for at least 5-10 years, and without crappy store locations or heavy-using low-paying legacy members.
9) Company announces they are spending $100-250 million renovating old stores and rolling out a new marketing/branding compaign to rebuild membership.
Boys, it happens all the time. Shareholders are, in my humble opinion, toast at this point. The company all but said this in their ass covering last press release. I'm selling all my shares, and buying the bonds. I plan to be a shareholder in the NEW company.
It isn't right, and some people should go to jail, especially Toback and especially the people before him that took a profitable company, loaded it with debt and bloat, and then left when "things didn't pan out". Not fair, but it is the way the game is played.
Good luck to all longs and shorts. Do your own due dilligence, one way or the other.
