Bankrupt GNC Approved to Solicit Votes on Reorganization Plan

GNC Holdings Inc. won bankruptcy court approval to solicit votes on a dual-option reorganization plan, overcoming opposition to a feature intended to generate support from unsecured creditors.

None of the provisions in the nutrition supplement retailer’s Chapter 11 plan render it “patently unconfirmable,” Judge Karen B. Owens of the U.S. Bankruptcy Court for the District of Delaware ruled during a telephonic hearing Wednesday.

A committee of unsecured creditors had taken issue with what it called a “death trap” provision that would only guarantee unsecured creditors a form of recovery if they vote in favor of the plan and agree not to challenge more senior claims.

GNC, however, said it’s essentially a “settlement offer” from the company’s first-lien lenders.

“Our view is the unsecured creditors are out of the money,” said GNC bankruptcy attorney Richard Levy of Latham & Watkins LLP. “It’s up to them whether they want to accept that offer or not,” he said at the hearing.

GNC’s plan will be distributed creditors while the company advances a $770 million sale to China-based shareholder Harbin Pharmaceutical Group Holding Co.

Owens on Wednesday approved GNC’s entry into the “stalking horse” agreement, giving Harbin the right to collect a $22.8 million fee if it’s outbid by another interested party or the deal is otherwise terminated.

GNC filed for bankruptcy in June with about $900 million in funded debt and $111 million in unsecured liabilities. The company said it sought help to wind down about 726 store locations throughout the U.S. and Canada.

As part of its reorganization, the company planned a dual-track scenario where it would restructure its balance sheet either through a standalone plan or an asset sale. It secured $130 million in new liquidity to finance its bankruptcy proceedings.

The case is In re GNC Holdings, Inc., Bankr. D. Del., No. 20-11662, hearing 8/19/20.