WeightWatchers, also known as WW International Inc., is moving forward with its Chapter 11 restructuring plan, which aims to restructure its capital structure, reduce debt, and set aside equity for its existing stockholders. The company is seeking approval for an equity swap as part of its plan, with a confirmation hearing scheduled for June.

During a virtual hearing held Thursday, U.S. Bankruptcy Judge Craig T. Goldblatt granted interim approval to a package of first-day motions, including allowing WeightWatchers to use available cash to fund its bankruptcy proceedings. The company will also begin soliciting votes on its Chapter 11 plan ahead of the confirmation hearing set for mid-June.

Transformative Capital Restructure

Under the proposed plan, WeightWatchers aims to restructure approximately $1.6 billion of its capital, including an equity offering and $465 million in take-back debt. The plan has garnered support from more than 70% of the company’s secured creditors, positioning WeightWatchers for a stronger future in the competitive weight loss market.

Elisha D. Graff, an attorney representing WeightWatchers, described the restructuring as a "fundamental and transformative capital structure fix," emphasizing its potential to position the brand for long-term success. The plan proposes exchanging $1.1 billion in secured debt for equity, which would also save the company $50 million in annual interest costs.

Equity Swap for Existing Stockholders

A key feature of the plan is the allocation of 9% of newly issued equity to WeightWatchers’ current stockholders, contingent upon meeting certain case milestones. This allocation would be a significant recovery for stockholders, as they are typically last in line under bankruptcy's payment priority. However, the 9% equity allocation could be reduced if the company does not meet the deadlines outlined in the restructuring support agreement.

Chapter 11 Filing Details

WeightWatchers filed for Chapter 11 protection in Delaware earlier this week, disclosing over $1.6 billion in secured debt and approximately $38 million in unsecured claims. The company's secured debt consists of a revolving credit facility, term loans, and senior notes. WeightWatchers' Chief Financial Officer, Felicia DellaFortuna, noted that the company has experienced declining revenue over the past six years, as consumer preferences shift away from structured weight loss programs and towards weight loss medications like GLP-1s. The COVID-19 pandemic further exacerbated challenges, particularly in the company’s in-person workshops.

Next Steps and Timeline

The proposed Chapter 11 plan outlines a timeline for confirming the restructuring in June. The secured creditors are expected to exchange their debt for 91% of the reorganized equity and a share of the new debt totaling $465 million.

Judge Goldblatt has approved all first-day motions and set a second-day hearing for early June, with a final confirmation hearing scheduled for June 17, 42 days after the bankruptcy filing.