The health and wellness company’s Chapter 11 petition filed in U.S. Bankruptcy Court in Delaware allows the retailer to keep operating and shut hundreds of under-performing stores. GNC planned a dual-track scenario where it will restructure its balance sheet through a standalone plan or sale of the company, according to a
GNC began the process with a potential buyer and agreement in principal with an affiliate of its largest shareholder, China-based
The agreement sets an initial bidding price of
Trading in GNC shares was halted to let investors absorb the news. The stock closed yesterday at 81 cents.
GNC’s pre-negotiated plan of reorganization will include store closures as it looks to emerge leaner with fewer locations and less debt. Certain lenders also provided $130 million in additional liquidity to financially support the company through its proposed restructuring.
With the support of its lenders and stakeholders, GNC expects to confirm a standalone plan of reorganization or complete a sale that will allow the business to exit from its restructuring process by the fall. GNC’s U.S. and international franchise partners and its corporate operations in Ireland, which are separate legal entities, aren’t part of the bankruptcy.
The turnaround will be complicated by the retail industry’s temporary shutdown of stores to help stop the spread of Covid-19. That has been partially offset by the company’s e-commerce operations, whose sales increased 25% in the
GNC has been
As cash on hand dwindled, GNC warned it might
The bankruptcy plan calls for a commitment from certain term loan lenders who agreed to provide GNC with $100 million of new money structured as a debtor-in-possession loan, and an additional $30 million from various changes to the company’s existing credit agreement, according to the statement. With the increased liquidity and cash flow from ongoing operations, GNC said it will meet its “go forward financial commitments” as it works through the process.
The Pittsburgh-based company has struggled in recent years, clawing its way out of difficulty in February 2018 when it refinanced its loans and lined up a $300 million investment from Harbin.
Most of GNC’s outlets are in malls and strip shopping centers, forcing them to contend with the same declines in foot traffic that have affected other retailers. Sales at brick-and-mortar stores have fallen further amid stay-at-home orders and the wariness of some to venture out in public.
Over the past year, GNC started to reduce its store-count, while investing in its online and omnichannel presence, the company said. As part of the bankruptcy restructuring, GNC will seek to speed up closures of at least 800 to 1,200 stores.
“This acceleration will allow GNC to invest in the appropriate areas to evolve for the future, better positioning the company to meet current and future consumer demand around the world,” the company said.
The chain sells health and nutrition products worldwide, including vitamins, supplements, minerals, herbs, sports nutrition, diet and energy supplements. It has about 5,200 retail locations throughout the U.S., including around 1,600 Rite Aid store-within-a-store locations, as well as operations in about 50 international markets.
GNC traces its roots to 1935 when David Shakarian opened a health-food shop selling yogurt and sandwiches in Pittsburgh. The chain rode a wave of interest in nutrition, eventually expanding to over 9,000 outlets. It employed about 12,400 people at year-end.
The company said it expects to file in a Canadian court seeking to have the U.S. proceeding designated to cover assets there.
The case is GNC Holdings Inc.,
(Updates with trading halt in the fifth paragraph. A previous version corrected the name of IVC and the number of stores to be closed.)
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