BY Fraser Tennant
Due to coronavirus (COVID-19)-related impacts on its business, global health and wellness brand GNC Holdings, Inc. is to pursue a dual-path process that will allow it to restructure its balance sheet and accelerate its business strategy through Chapter 11 bankruptcy.
The Chapter 11 filing allows the retailer to keep operating, although hundreds of underperforming stores – approximately 800 to 1200 – will be closed. GNC’s US and international franchise partners and all corporate operations in Ireland are separate legal entities and are not a part of the Chapter 11 process.
“The COVID-19 pandemic created a situation where we were unable to accomplish our refinancing and the abrupt change in the operating environment had a dramatic negative impact on our business,” said GNC in a statement.
With the support of its lenders and key stakeholders, GNC expects to confirm a standalone plan of reorganisation or consummate a sale that will enable the business to exit from this process later this year. To this end, the company has secured approximately $130m in additional liquidity – $100m debtor-in-possession (DIP) financing and $30m from modifications to an existing credit agreement.
GNC is confident that between financing and cash flow from normal operations, and with the continued support of the International Vitamin Corporation (IVC), its largest vendor, GNC will meet its go-forward financial commitments as it works to achieve its financial objectives.
Headquartered in Pittsburgh, PA, GNC is a leading global specialty retailer of health and wellness products, including vitamins, minerals and herbal supplement products, as well as sports nutrition products and diet products. The company has been led by chief executive Ken Martindale since September 2017.
Furthermore, GNC has a diversified, multichannel business model and derives revenue from product sales through company-owned retail stores, domestic and international franchise activities, third-party contract manufacturing, e-commerce and corporate partnerships.
However, like many retailers, the Pittsburgh-based company has struggled in recent years, clawing its way out of difficulty in February 2018 when it refinanced its loans and negotiated a $300m investment with Chinese health food group Harbin. Despite this, over the past 12 months, the company has reduced its store-count.
GNC concluded: “This reduction will allow GNC to invest in appropriate areas to evolve for the future, and better position the company to meet current and future consumer demand around the world.”
News: GNC parent company files for bankruptcy protection, plans to permanently close up to 1,200 stores