In a motion filed by Busy Body Home Fitness owner Fitness Holdings International, the court has been asked to approve going-out-of-business sales at all remaining stores and for the business to shut down by the end of July.
On July 6, a hearing on the motion was set for July 14, expedited per FHI’s request from the previously scheduled hearing of July 28.
The motion, filed in late June with the U.S. Bankruptcy Court, Central District of California, noted that FHI’s secured pre-petition lender has withdrawn its consent to allow FHI to continue to use cash collateral except to liquidate remaining assets. That would mean the doors would slam on 24 remaining Busy Body stores (www.busybody.com) of the approximately 111 the company started with when it filed for Ch. 11 bankruptcy reorganization in October 2008. Of those 24, one is in Alaska, three are in Colorado, and 20 are in California.
In addition, FHI according to court documents had been negotiating a potential sale of the remaining stores to “an entity affiliated with Hancock Park.…” Hancock Park (www.hpcap.com) is the investment fund that owned Fitness Holdings International, which operated Busy Body, as well as Omni Fitness stores.
“The debtor has no choice but to close its remaining stores (unless the debtor is able to sell its business operations to another entity before completion of the store closing sales),” the court document stated.
“It was contemplated that the secured lender would be party to such transaction since, as part of the consideration to be provided the debtor, the proposed buyer would assume the debtor’s obligations to the secured lender,” the filing stated. “The secured lender has elected not to support and participate in the proposed transaction.”
In other motions before the court: A hearing is set for July 28 to seek court approval to pay FHI’s financial advisor Kibel Green the remainder of its fee, which was approved by the court in November 2008. At that time, the fee was set at $25,000 a week for eight weeks, followed by a fee of $15,000 for the remainder of its employment, which ended June 7, 2009. A total of $555,015.94 was or will be made by FHI to the advisor during its employment.
The court documents also stated that since it filed bankruptcy FHI has paid approximately $5 million to its secured lender, Pacific Western Bank, of the $18.8 million it was due at the beginning of the bankruptcy case.
The documents filed by FHI stated that all operations should cease at the remaining stores by July 26. Negotiations to sell all or part of the stores continue and, the company told the court in its filing, if a deal is struck before the July 26 deadline, some or all of the stores could remain open under new ownership.
Meanwhile, ongoing in the same court, is a suit filed May 21 by the unsecured creditors committee claiming fraudulence on the part of FHI. (Click here to see a May 22, 2009, SNEWS story, “FHI creditors sue owner Hancock Park et al claiming fraudulence prior to bankruptcy, seek $21 million.”) It has asked to recover $20,881,704 from FHI owner Hancock Park that the creditors said HP obtained through “fraudulent conveyances that occurred as a result of a June 2007 refinancing of (FHI’s) debt obligations.” A hearing on that case is set for July 28, while Pacific Western has until July 10 to respond to the court on the allegations. The proposed liquidation of the remaining Busy Body stores should have no effect on this pending case, SNEWS was told by sources.
SNEWS® View: When the industry gathers in Denver Aug. 6-7 for the Health & Fitness Business Expo, the last of the Busy Body Home Fitness stores will have likely been shut, leaving the industry mourning the passing. However, the passing of the company will leave the door open in various markets for others who are ready and willing to jump in, perhaps on a smaller scale. We fully expect to hear of others who will be opening doors as quickly as some of the Busy Body doors slam shut for the last time, just as we expect to see former Busy Body employees at work again in them.