Bally Ousts CEO, Shares Drop 30%

Bally Total Fitness Holding Corp., a chain of some 400 fitness centers of which roughly 20 are franchised, has given Chief Executive Paul Toback the boot. Its board of directors appointed dissident members of the board from rebel rouser Pardus Capital Management to replace Toback. Don Kornstein will be the interim chairman and Barry Elson will be the acting CEO. At the same time, Bally also announced that the search for a buyer had been unsuccessful. Its shares fell to an all time low of some 35 percent in the morning session.

Forbes considers Toback a scape goat, saying, "Bally's found someone to blame."

WSJ ($$$): "Investors have been unhappy with Bally's strategies and financial problems...The company had to restate earnings from 2000 into 2005 after improperly accounting for memberships."

Reuters: "It's disappointing," said KDP Investment Advisors analyst Barbara Cappaert. "The panacea for the bonds and the stock was that they would try and get someone to buy out the company and resolve all their issues and clearly that's not happening."

"Bally, which Cappaert said has about six months to refinance a large portion of its $778 million in debt, also lowered its full-year outlook, saying it expects its 2006 cash contribution to be 10 percent to 20 percent lower than the $120 million it had in 2005."

Forbes: "Bally's, which had to restate five years of financial reports, has sought a buyer in vain. So the new C-level team will explore the viability of various alternate means of financing...The departing CEO's severance deal reportedly includes a lump sum payment for more than $3 million, and the vesting of 135,000 shares of restricted stock... Some execs decide to leave a sinking ship; some are invited to leave. But it's nice to keep the life jacket."