Parent of Vitamin Shoppe and Pet Supplies Plus files bankruptcy
Franchise Group has filed for bankruptcy with plans to shut down one of its retail banners.
The company (also known as FRG), whose portfolio includes Vitamin Shoppe, Pet Supplies Plus, Buddy’s Home Furnishings and American Freight, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. Under the restructuring agreement, all of the brands will continue operations except for American Freight, which sells discounted home appliances, mattresses and furniture.
In a statement, FRG noted that American Freight has struggled due to “sustained inflation and macroeconomic challenges facing the large durable goods sector.” Store closing sales will begin at its stores and online on November 5.
FRG said it has struck a deal with lenders that own the majority of its senior debt and under the proposal, lenders have agreed to swap out debt for 100% of the equity in the reorganized business. Lenders have committed $250 million in debtor-in-possession financing, subject to approval by the bankruptcy court.
“Today’s announcement to de-lever our balance sheet is a pivotal step forward in enabling our marketleading businesses Pet Supplies Plus, The Vitamin Shoppe, and Buddy’s Home Furnishings to realize their full potential,” said Andrew Laurence, president and CEO of FRG. “Each of these businesses has a demonstrated value proposition and provides great products and services to customers, which they will continue to do seamlessly during this process. Strengthening FRG’s balance sheet will allow us to enhance our support for these businesses as they advance their growth trajectories.”
As part of this process, FRG said it plans to conduct a marketing process via court-approved bidding procedures, “which will ensure that the company is maximizing value and best positioning its operating businesses for long-term success as it pursues confirmation of the agreed-upon prearranged Chapter 11 Plan.”
Franchise Group went private last year in a $2.6 billion buyout deal led by CEO Brian Kahn, with the assistance of investment and brokerage firm B. Riley. In January, Kahn stepped down as CEO amid a criminal investigation into his alleged role in a securities fraud case related to the collapse of hedge fund Prophecy Asset Management.
Willkie Farr & Gallagher LLP and Young Conaway Stargatt & Taylor, LLP are serving as legal counsel, AlixPartners is serving as financial advisor and chief restructuring officer, and Ducera Partners is serving as investment banker to the company. Paul Hastings LLP is serving as legal counsel and Lazard is serving as investment banker to the first lien ad hoc group.
