GNC Holdings Inc. has filed for Chapter 11 bankruptcy protection with plans to close at least 800 to 1,200 stores as it looks to cut its debt and restructure amid the COVID-19 crisis.
The struggling, 85-year-old vitamin and supplement retailer said it has reached an agreement with the majority of its secured lenders and key shareholders to pursue a dual-path restructuring process that will allow the company to emerge as a standalone business or for it be sold as a going concern. The plan allows GNC to restructure its balance sheet and accelerate its store optimization strategy. Last July, GNC, which is saddled with nearly $1 billion of debt, announced plans to shutter approximately 900 stores. As of March 2020, GNC had 7,300 locations globally, including 5,200 in the U.S.
“Over the past year, GNC has been executing a store portfolio optimization strategy to close underperforming stores, while continuing to invest in omnichannel and brand strategies to better meet consumer demand,” the company stated. “This process will enable GNC to accelerate these strategies… 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.”
Under the terms of its agreement with lenders and shareholders, GNC will look for a buyer, with the initial purchase price set at $760 million. The sale would be executed through a court-supervised auction process at which higher and better bids may be presented
“In support of the proposed sale path, GNC has commenced a comprehensive marketing process for its business,” the company stated. “If the sale transaction is timely consummated as outlined, it would be implemented instead of the standalone plan transaction.”
GNC said its stores will remain open through the bankruptcy process. The company has secured $130 million in liquidity, including $100 million in debtor-in-possession financing and $30 million from modifications to an existing credit facility. (GNC’s U.S. and international franchise partners and all corporate operations in Ireland are not a part of the filing.)
GNC's case is being heard in the U.S. Bankruptcy Court for the District of Delaware. The company expects to file in the applicable Canadian court seeking recognition of the U.S. Chapter 11 proceeding.