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The owner of Vitamin Shoppe, Franchise Group Inc., filed for Chapter 11 bankruptcy in Delaware, citing over $1 billion in secured debt. The filing comes a year after the company transitioned to private ownership, intending to reduce operating expenses.

Impact of Take-Private Deal on Franchise Group’s Finances

Franchise Group's Chapter 11 filing, documented in court filings on Sunday, follows a 2023 take-private transaction financed by B. Riley Financial. This maneuver aimed to reduce the financial obligations tied to its former public-company status. The restructuring was also part of Franchise Group’s larger strategy to monetize business units, including Vitamin Shoppe, as part of an overarching debt-reduction plan.

Chief Restructuring Officer David Orlofsky explained in a first-day declaration that despite these efforts, industry challenges and a costly investigation into the role of Franchise Group’s founder and CEO in a separate hedge fund’s collapse hindered the company’s deleveraging strategy. This setback in restructuring goals directly influenced Vitamin Shoppe’s Chapter 11 proceedings.

Franchise Group’s Diverse Portfolio and Financial Breakdown

In addition to the Vitamin Shoppe brand, Franchise Group owns several other retail businesses, including Pet Supplies Plus, American Freight, and Buddy's Home Furnishings. Collectively, these holdings represent a network of 2,200 retail locations and nearly 12,000 employees, according to the court declaration. Despite the broad portfolio, Franchise Group’s escalating financial issues have made restructuring necessary.

The company entered Chapter 11 with nearly $2 billion in debt across various loans. This includes a $248.7 million asset-based loan, a $1.097 billion first-lien term loan, a $125 million second-lien term loan, and a $514.7 million HoldCo term loan facility.

Vitamin Shoppe Hits Chapter 11 : Restructuring Support and Bankruptcy Financing

The majority of Franchise Group’s existing lenders have agreed to a restructuring support plan, which includes providing $250 million in new financing to facilitate the Chapter 11 process. This new funding is expected to help Vitamin Shoppe and other Franchise Group businesses navigate the restructuring and continue operations during the bankruptcy proceedings.

Vitamin Shoppe Hits Chapter 11 : Legal Representation and Case Details

Franchise Group’s legal representation includes Edmon L. Morton, Matthew B. Lunn, Allison S. Mielke, and Shella Borovinskaya of Young Conaway Stargatt & Taylor LLP, along with Debra M. Sinclair, Matthew A. Feldman, Betsy L. Feldman, and Joseph R. Brandt of Willkie Farr & Gallagher LLP.