Fair Lanes Inc., the nation's biggest independent operator of bowling alleys, received court approval yesterday to emerge from bankruptcy proceedings with new owners, less debt and more money for renovations.
U.S. Bankruptcy Judge James F. Schneider accepted a plan that gives all of Fair Lanes' stock to the company's creditors, wiping out the ownership stake of a leveraged buyout firm that bought the bowling concern in 1989.
Balfour Investments Inc., a New York investment firm, and AMF, a Richmond, Va., bowling equipment maker and alley operator, will be Fair Lanes' major shareholders after the reorganization. The two will control more than half the stock.
Under the plan, Fair Lanes' long-term debt will be $115 million, about half its previous level. With the reduced debt, the Hunt Valley-based company's annual interest payments will shrink to $8.5 million from $20 million, said Mac Clayton, chief executive officer. Fair Lanes has annual cash flow of $20 million, Mr. Clayton said.
"Even under a very conservative set of operating assumptions, this capital structure would be one the company could live with indefinitely," Mr. Clayton said.
Fair Lanes, founded in Baltimore in 1923, wants to increase sales -- first by boosting promotions and fixing up many of its 106 bowling centers. Mr. Clayton would not rule out any expansion plans, but said that would come later.
Annual capital spending will rise from $4 million to $6 million. Revenue is expected to be about $100 million this year.
"I'm not sure bowling alleys have been known as great, clean, high-service institutions in the past," Mr. Clayton said. "Our role model is Blockbuster," the video rental concern, he said. "We want to be the Blockbuster of the bowling industry."
The Fair Lanes court case in Baltimore was a "prepackaged" bankruptcy, in which major creditors agreed to the plan before the company entered Chapter 11 proceedings in June.
Fair Lanes' three-month term in bankruptcy court is about average for prepackaged plans, which are intended to minimize lawyers' fees and other costs, said George Putnam, president of New Generation Research, a Boston bankruptcy investment firm.
Balfour and AMF are part of a class of senior creditors that will get 94 percent of Fair Lanes' stock in return for trimming the principal on their debt to $90 million from $138 million and cutting the interest rate. The remaining 6 percent of Fair Lanes' ownership will go to unsecured creditors.