0001104659-06-003768.txt : 20060125 0001104659-06-003768.hdr.sgml : 20060125 20060125125620 ACCESSION NUMBER: 0001104659-06-003768 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20060125 DATE AS OF CHANGE: 20060125 GROUP MEMBERS: WATTLES CAPITAL MANAGEMENT, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BALLY TOTAL FITNESS HOLDING CORP CENTRAL INDEX KEY: 0000770944 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEMBERSHIP SPORTS & RECREATION CLUBS [7997] IRS NUMBER: 363228107 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-47769 FILM NUMBER: 06548851 BUSINESS ADDRESS: STREET 1: 8700 WEST BRYN MAWR AVENUE STREET 2: SECOND FLOOR CITY: CHICAGO STATE: IL ZIP: 60631 BUSINESS PHONE: 773-380-3000 MAIL ADDRESS: STREET 1: 8700 WEST BRYN MAWR AVENUE STREET 2: SECOND FLOOR CITY: CHICAGO STATE: IL ZIP: 60631 FORMER COMPANY: FORMER CONFORMED NAME: BALLYS HEALTH & TENNIS CORP DATE OF NAME CHANGE: 19940526 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WATTLES MARK J CENTRAL INDEX KEY: 0000938576 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 9275 SW PEYTON LANE CITY: WILSONVILLE STATE: OR ZIP: 97070 BUSINESS PHONE: 5035701615 MAIL ADDRESS: STREET 1: 9275 SW PEYTON LANE STREET 2: ATTN: BETH M. PIERSON CITY: WILSONVILLE STATE: OR ZIP: 97070 SC 13D/A 1 a06-3305_1sc13da.htm AMENDMENT

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549
	SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 1)*

Bally Total Fitness Holding Corporation

(Name of Issuer)

Common Stock, $.01 par value

(Title of Class of Securities)

058 73K 10 8

(CUSIP Number)

Mark J. Wattles
Wattles Capital Management, LLC
7945 W. Sahara #205
Las Vegas, Nevada 89117
(303) 801-4003

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

January 25, 2006

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 058 73K 10 8

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Mark J. Wattles

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			ý

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization U.S.

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 3,425,100

			8.	Shared Voting Power —

			9.	Sole Dispositive Power 3,425,100

			10.	Shared Dispositive Power —

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 3,425,100

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 8.9% (1)

	14.	Type of Reporting Person (See Instructions) IN

(1) Amount does not reflect an actual change in beneficial ownership of the Reporting Persons but, rather, reflects updated information on the outstanding number of shares of Common Stock released by the Issuer since the last filing by the Reporting Persons.

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Wattles Capital Management, LLC

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			ý

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC, OO

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 3,425,100

			8.	Shared Voting Power —

			9.	Sole Dispositive Power 3,425,100

			10.	Shared Dispositive Power —

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 3,425,100

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 8.9% (1)

	14.	Type of Reporting Person (See Instructions) OO

This Amendment (“Amendment No. 1”) is being jointly filed by Mark J. Wattles and Wattles Capital Management, LLC (“WCM”) pursuant to Rule 13d-1(k) of the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Wattles and WCM are together referred to as the “Reporting Persons.”

This Amendment No. 1 amends the Schedule 13D originally filed with the Commission on November 14, 2005 (the “Original Schedule 13D”). The Original Schedule 13D, as amended by Amendment No. 1, is referred to as the “Schedule 13D.”

All terms used, but not defined, in this Amendment No. 1 are defined in the Original Schedule 13D. The summary descriptions (if any) contained herein of certain agreements and documents are qualified in their entirety by reference to the complete text of such agreements and documents filed as Exhibits hereto or incorporated herein by reference.

Item 4 of the Original Schedule 13D is amended and restated in its entirety as follows:

Item 4.	Purpose of Transaction
The Reporting Persons acquired the Shares for investment purposes. The Reporting Persons intend, among other things, to continue to evaluate the performance of the Issuer, its board of directors and its management; the value of the Shares and the conditions in the securities markets; and general economic and industry conditions. Based on such evaluation and review and other factors, the Reporting Persons will continue to consider various alternative courses of action with respect to their investment in the Issuer and will in the future take such actions as they deem appropriate in light of the circumstances existing from time to time. The Reporting Persons may discuss such and other matters with management or directors of the Issuer, other existing and prospective shareholders, existing and prospective bondholders, creditors, industry analysts, existing or potential strategic partners or competitors, investment and financing professionals, sources of credit and other investors. The Reporting Persons have contacted management, employees, and certain shareholders and bondholders of the Issuer. The Reporting Persons have no present intention to participate in a “group” within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, except insofar as the Reporting Persons themselves constitute a group.
By letter dated January 25, 2006, to Paul A. Toback, Chairman of the Board, President and Chief Executive Officer of the Issuer, Reporting Persons provided their views on the Issuer’s business and future direction. Reporting Persons also explained that, based on those views, Reporting Persons intended to support the specific proposals made by Pardus European Opportunities Master Fund L.P. but not to give Pardus discretion in voting on the proposals of Liberation Investment, L.P. or other matters that come before the Annual Meeting of Stockholders of Issuer scheduled for January 26, 2006. This summary description is qualified in its entirety by the text of the letter, a copy of which is attached hereto as Exhibit 2.
Future actions of the Reporting Persons may involve the purchase of additional securities of the Issuer or, alternatively, the sale of all or a portion of the securities of the Issuer held by the Reporting Persons, in each case in the open market or in privately negotiated transactions. Such actions may also include seeking representation on the Issuer’s board of directors; seeking to acquire control of the Issuer through a merger, proxy solicitation, tender offer, significant equity investment, exchange offer or otherwise; or such other actions as the Reporting Persons may deem appropriate.
Except as described herein, the Reporting Persons have no present plans or proposals that relate to or would result in any of the actions described in Item 4(a) through (j) of Schedule 13D. The Reporting Persons reserve the right to acquire or dispose of securities of the Issuer or to formulate other purposes, plans or proposals regarding the Issuer or its securities to the extent deemed advisable in light of general investment considerations, market conditions and other factors.

Item 5 (a)–(b) of the Original Schedule 13D is amended and restated in its entirety as follows:
Item 5.	Interest in Securities of the Issuer
(a)-(b) As of January 25, 2006, WCM owned 3,425,100 shares of Common Stock. According to the Issuer’s Proxy Statement for the Issuer’s Annual Meeting of Stockholders scheduled for January 26, 2006, there were 38,285,905 shares of Common Stock issued and outstanding as of December 20, 2005. Based on the foregoing, WCM may be deemed to have sole voting and dispositive power over, and therefore beneficial ownership of, approximately 8.9% of such issued and outstanding Common Stock. Because Mr. Wattles owns all of the membership interests of WCM, he may be deemed to have indirect beneficial ownership of the Common Stock owned by WCM.
Item 7 of the Original Schedule 13D is amended and restated in its entirety as follows:
Item 7.	Material to Be Filed as Exhibits
Exhibit 1		Joint Filing Agreement, dated as of November 14, 2005, by and between Wattles Capital Management, LLC and Mark J. Wattles, incorporated by reference to Exhibit 1 to Reporting Persons’ Schedule 13D, dated November 2, 2005, and filed with the Securities and Exchange Commission on November 14, 2005.
Exhibit 2		Letter, dated January 25, 2006, to Paul A. Toback, Chairman of the Board, President and Chief Executive Officer of Bally Total Fitness Holding Corporation, from Mark J. Wattles and Wattles Capital Management, LLC.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

January 25, 2006

	WATTLES CAPITAL MANAGEMENT, LLC


	By:	/s/ Mark J. Wattles
	Name:		Mark J. Wattles
	Title:		President


	/s/ Mark J. Wattles
	Mark J. Wattles

Index of Exhibits

Exhibit 2

Letter dated January 25, 2006, to Paul A. Toback, Chairman of the Board, President and Chief Executive Officer of Bally Total Fitness Holding Corporation, from Mark J. Wattles and Wattles Capital Management, LLC.

EX-2 2 a06-3305_1ex2.htm LETTER DATED JANUARY 25, 2006.

Exhibit 2

Mark J. Wattles
Wattles Capital Management, LLC
7945 W. Sahara #205
Las Vegas, NV 89117
Phone (303) 801-4003

January 25, 2006

Paul A. Toback

Chairman of the Board, President and Chief Executive Officer

Bally Total Fitness Holding Corporation

8700 West Bryn Mawr Avenue, Second Floor

Chicago, IL 60631

Dear Mr. Toback:

Thank you for the time you have spent with me explaining the Company’s position regarding the current three proxy solicitations.

As an investor/shareholder, Wattles Capital Management (WCM) has spent considerable time on due diligence in an effort to determine the current and potential enterprise value of Bally Total Fitness Holding Corporation and the best direction for achieving the highest future enterprise value. A team of 10 WCM employees and consultants is near completing its tours of all of the Bally clubs. WCM has been evaluating the quality of the real estate locations, leasehold improvements, equipment and general operations.

WCM has found the locations on average to be good with only a small number of the clubs needing to be relocated. Most of the clubs are in need of capital for refreshing/updating of the interior leasehold improvements although this is not surprising considering the capital constraints the Company has been under for some time. As expected, recent capital constraints have left most clubs in need of equipment repair, partial equipment replacement and/or additional equipment. WCM was pleased to see a remodel program under way, with the resulting remodeled club having a look and feel not significantly different from what one would expect in a new club.

I think there is significant upside in membership growth and resulting revenues from investing the capital to bring the existing clubs up to near new club standards. While I believe this could be accomplished spread out over time using your existing cash flow I also believe that the best alternative would be to invest the capital necessary within a short period of time followed by heavily marketing each as a “remodeled club”.

It has also become apparent to me from discussions with you, your employees and club members that the future pricing model of fitness clubs is “pay as you go” which you have recently implemented as an option. The salespeople at the clubs, however, appear to be

focused on long term contracts with “pay as you go” as a secondary option. In the average consumer’s mind, the Bally brand represents long term binding memberships. I believe Bally needs to heavily promote “pay as you go” memberships as the primary option even at the expense of potentially more lucrative long term contract memberships. This may not have the desired effect on reported revenues and earnings in the near term, but there is very little doubt in my mind that the long term benefit resulting from increased membership will far out weigh any near term impact. I suspect you also see the long term benefit but may be constrained by the demands of delivering near term results as a public company.

Based upon my own due diligence and the opportunity I see for increased profits, I believe there is no question that Bally would benefit from being a private company for the near term and that upon completion of due diligence, together with the cooperation of Bally’s management, J.P. Morgan Securities, Inc. and The Blackstone Group can successfully sell Bally in a transaction that would satisfy existing shareholders while leaving plenty of profit for the acquirer.

It is with a potential sale in mind that I have decided to support the specific proposals made by Pardus European Opportunities Master Fund L.P., but not to give Pardus discretion in voting on the proposals of Liberation Investments, L.P. or other matters that come before the annual meeting. I support the slate of directors proposed by Pardus. In particular, I support Don Kornstein as a Board member. While it is the Board’s decision to make, my preference would be for Mr. Kornstein to lead the independent committee that should be charged with selling Bally. Based upon my conversations with Mr. Kornstein and other sophisticated investors that I know who have had dealings with Mr. Kornstein, I believe he would be an excellent addition to the Board and would fairly represent the interests of all shareholders. Please note that I have no contract, arrangement, understanding or relationship with Pardus or any of its affiliates. I reserve my right to vote differently if, in my judgment, circumstances warrant a change.

It is not clear to me how much of the responsibility for Bally’s problems resides with current management, but it is clear to me that at a minimum a foundation is being laid by current management for a successful turnaround of this Company. Upon conclusion of the annual meeting, I would hope that the Board will focus its attention on a successful sale of the Company and that the management will re-focus its attention on improving operations to benefit the Company’s owners/shareholders, whether Bally is public or private.

I also respectfully request that you and your fellow board members reconsider your actions against your two largest shareholders and Mr. Kornstein and drop your lawsuits against them. These are significant distractions to the task at hand and I can’t see any probable positive outcome from their pursuit.

Mark Wattles

Manager

Wattles Capital Management, LLC

Under the Securities Exchange Act of 1934 (Amendment No. 1)*

Under the Securities Exchange Act of 1934
(Amendment No. 1)*