GNC files for Chapter 11 bankruptcy to reorganize or sell the business

The COVID-19 pandemic, with its store closures and difficult financial environment, was too much for the debt-strapped nutrition company to overcome.

Victoria A.F. Camron, Digital content specialist

June 24, 2020

4 Min Read
GNC files for Chapter 11 bankruptcy to reorganize or sell the business

GNC Holdings Inc. will file for Chapter 11 protection in the U.S. Bankruptcy Court, it announced late Tuesday—just seven days before it faced paying a debt of $900 million or more.

GNC plans to reorganize, but the company and its lenders also have agreed to sell the business via a court-supervised auction. Harbin Pharmaceutical Group Holding Co. Ltd.—an affiliate of GNC's largest shareholder—has also agreed to the sale. The agreement suggests a $760 million purchase price, but the auction could generate a higher price. GNC has begun the process of marketing the company, according to the announcement.

The international health and wellness company, which formulates proprietary dietary supplements and operates retail stores around the world, owed several lenders a total of $682 million as of Dec. 31, 2019. In March, GNC notified the Securities and Exchange Commission that management had substantial doubts that the company would be able to pay those debts—or even be operating by March 2021.

Although the company had been struggling with debt, lower sales and decreasing revenue, management apparently expected to avoid bankruptcy court. Then the COVID-19 pandemic struck. On March 24, 25% of GNC's stores in the United States and Canada—900 locations—were closed, mostly because shopping malls had been ordered to close. Another 700 were operating with limited hours, CEO Ken Martindale said during the fiscal 2019 financial call on March 25.

Related:GNC's future darkens with grim Q1 financial report

In the vendor and supplier FAQ filed with the Bankruptcy Court in Delaware, the company said, "Our Chapter 11 filing is the result of factors caused by the COVID-19 pandemic, which created a situation where we were unable to consummate a refinancing and the abrupt change in the operating environment impacted our business. The current circumstances have increased pressure on brands like ours that are experiencing decreased customer traffic at our physical stores."

Before the pandemic, GNC's managers were focusing on refinancing the debt and preparing for long-term growth, according to the FAQ. GNC had paid $500 million of its debt during the past two years, according to the FAQ.

GNC also faced a high likelihood of the New York Stock Exchange delisting its stock, possibly today. The NYSE warned the company that, as of April 21, its share price, company valuation and stockholder equity were all below the Exchange's listing standards. GNC had 45 business days—or until June 24—to submit a plan for increasing its average share price. It's not clear if that plan was ever presented to the Exchange. NYSE usually delists companies when they file for protection with the bankruptcy court.

Related:GNC reports another annual loss in fiscal 2019 earnings report

Chapter 11 applies only to corporate stores in U.S., Canada

The Chapter 11 reorganization affects corporate-owned stores in the United States and Canada; domestic and international franchisees, as well as corporate operations in Ireland, are not affected, GNC said the vendor and supplier FAQ.

The petition for relief was not available Tuesday night, and a first day hearing has not yet been scheduled, according to a docket website. Due to the coronavirus pandemic, most hearing are being conducted via telephone or videoconference, under the order of the court.

"For GNC, the Chapter 11 process will enable us to reorganize our business while accelerating the store portfolio optimization strategy we’ve been executing upon over the past year," the company said in the vendor and supplier FAQ. "We believe this process will increase our long-term growth potential by allowing us to focus on our omnichannel and brand strategies that will better position us to meet current and future consumer demand."

Under a May 15 agreement with its lenders—one that was recently extended until June 30—GNC could not borrow any additional money as it tried to refinance its debt. However, from some of its lenders, it has now received $100 million debtor-in-possession financing and about $30 million in liquidity through modifications of another loan, the company said.

Because its lenders are supporting the reorganization or a sale, GNC expects to complete the Chapter 11 process this fall.

"The company is confident that between financing and cash flow from normal operations, and with the continued support of its largest vendor, GNC will meet its go-forward financial commitments as it works to achieve its financial objectives," the company said in the announcement of the Chapter 11 filing. That vendor, International Vitamin Corporation, is also a joint venture partner. It will, according to the statement," ensure a continued supply of products to the company and advance the proposed sale of GNC's business."

The company's portfolio optimization plan includes closing as many as 1,200 underperforming stores, a process that GNC will accelerate under the reorganization. A new website,, provides a current list of the 29 stores in Canada and 219 in the United States that are closing.

About the Author(s)

Victoria A.F. Camron

Digital content specialist, New Hope Network

Victoria A.F. Camron was a freelance writer and editor contracted with New Hope Network from 2015 until April 2022, when she was hired as New Hope Network's digital content specialist—otherwise known as the web editor.

As she continues the work she has done for years—covering the natural products industry for and Natural Foods Merchandiser; writing up earnings calls and other corporate news; and curating roundups of trends and information for the website—she is thrilled to be an official part of the New Hope team. (She doesn't mind having paid holidays and vacations again, though!) Victoria also compiled and edited newsletters, and served as interim content director for Delicious Living in 2016.

Before working as a freelancer, she spent 17 years in community newspapers in Longmont, Colorado, and St. Charles and Wheaton, Illinois. Victoria is a Colorado native and a graduate of Metropolitan State College of Denver.

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