AMF Bowling re-enters Chapter 11

January 2013 | DEALFRONT | BANKRUPTCY & RESTRUCTURING

Financier Worldwide Magazine

Citing the continuing economic downturn, AMF Bowling Worldwide Inc., the world’s largest bowling-alley operator, filed for Chapter 11 bankruptcy protection in November. The filing marks the second time in 11 years that the company has sought such protection.

AMF anticipates that it will be in a position to exit Chapter 11 before the end of April 2013. In a statement on the company’s website, AMF confirmed that it will now embark upon a rigorous restructuring plan to eradicate a significant amount of its debt and provide the company with “the operational flexibility and resources to invest in improvements to its bowling centres and other growth initiatives.”

According to documents filed in the US bankruptcy court in Richmond, Virginia, the company and 15 of its subsidiaries reported between $100m and $500m in assets and liabilities. The paperwork also noted that AMF has between 1000 and 5000 creditors.

During the restructuring, the company’s top lenders will be able to convert their claims into equity within a restructured AMF or, conversely, the company may look to “solicit higher and better offers” and be sold to another buyer as a going concern. These proposals are subject to court approval.

Steve Satterwhite, AMF’s chief financial officer and chief operating officer, noted that the bankruptcy process “should be virtually seamless going forward for our customers, suppliers and employees. AMF is open for business and our bowling centres are serving customers as usual”. According to figures released by the company, AMF currently hosts 20 million bowlers a year.

The restructuring program will be made possible by $50m of new financing which has been secured by the company. The debtor-in-possession (DIP) financing has been claimed from a number of AMF’s first lien secured lenders. Accordingly, all employee wages and benefits will be paid as usual, as will the company’s league bowler rewards program. Reuters reports that an additional $150m worth of financing will be made available to help AMF operate once it has emerged from Chapter 11.

In light of its continued financial difficulties, and “unmanageable” debt, AMF enlisted Moelis & Co in late 2011 to sell the company and its assets; however, despite entering into advanced negotiations with a number of interested parties, a sale did not materialise.

The restrictive terms of the company’s lease agreements with iStar Financial Inc, a real estate investment firm which owns 186 of AMF’s bowling centres, were a concern to prospective buyers. Accordingly, the company is hoping that the terms of its agreement with iStar will be amended during the Chapter 11 process, allowing AMF more operational freedom.

The company operates around 270 bowling centres in the US and Mexico but has struggled with declining revenues and dwindling attendances across its own league structure, and the industry in general. In 1998 the three largest bowling organisations in the US enjoyed approximately 4.1 million members, but by 2008 that number had fallen to around 2.6 million, a drop of 36 percent.

The company’s ongoing financial problems are linked to a discernible shift in the industry; league membership is down heavily when compared with casual gamers.

Mr Satterwhite noted that “unfortunately for AMF, the lasting effects of the recession and economic downturn have proven too difficult to overcome”.

AMF, which is based in Mechanicsville, Virginia, is no stranger to financial difficulties. In 2001 the company pursued an ambitious plan of expansion, acquiring over 250 new facilities. However, it struggled to manage the new centres and filed for Chapter 11 protection in July of the same year, emerging in February 2002.

Richard Summerfield