In a bidding war that stretched for several weeks, the team behind LFI Holding LLC -- including principal Ron Mendola of Key2Fitness -- has apparently nabbed most if not all of the assets of bankrupt Leisure Fitness.
A Nov. 5 order approving the sale of remaining assets, including vehicles and several store leases, was pending signature although Mendola had also on Nov. 5 contested the court trustee's exclusion of telephone, fax and cellular numbers from the deal. The trustee for the U.S. Bankruptcy Court, District of Delaware, stated in the case that began in September when an involuntary Ch. 7 bankruptcy was filed against Leisure Fitness: "The trustee is not authorized to quitclaim telephone, fax and cellular numbers, and LFI is not authorized to take any action to such telephone, fax and cellular numbers absent further order of the court."
The attorney for LFI stated in the document contesting the wording that LFI had taken steps to preserve the value of the numbers, which it believed were LFI's collateral. Those steps included making payments to reactivate certain numbers so they would not be reassigned by the telephone company, and LFI maintained its efforts were "in the best interest of all parties concerned."
The unsuccessful bidder in the process, including at a four-plus hour bidding war on the afternoon of Nov. 3, was the team behind Busy Body/Gyms To Go in Florida, which has told SNEWS® it would open stores in the area whether it won leases and assets or not. (Click here to see that Oct. 28, 2008, story, "Busy Body/Gyms to Go to take on mid-Atlantic with gaps opened by Leisure and Omni.") The Gyms To Go team did not agree to a wording change in the order approving the sale suggested by LFI, so the trustee, per the filing, did not add it, thus prompting the contest of the terms in the Nov. 5 order approving the sale.
"LFI does not believe that (the Gyms To Go team), as a non-creditor and unsuccessful bidder, has any standing on this issue," the contested order filed by LFI's attorney stated.
Previously, LFI had bought out one of the bank loans and attained Leisure's inventory for an unconfirmed amount, which SNEWS learned was close to $500,000. The Asset Purchase Agreement still to be signed and finalized stated that LFI was to pay $100,000 for the vehicle assumptions and $75,000 for the contract assumptions, plus the group would assume certain liabilities.
LFI must assume or reject any of the eight leases affected by Nov. 18, with a hearing set on that action for Nov. 25. The store leases included are Annapolis, Rockville, and Columbia, Md.; Montgomeryville, Penn.; Tyson's Corner, Va.; and Newark and Wilmington, Del., as well as a warehouse in Newark, Del.
In addition, the order of the trustee awaiting final signatures as of the end of the day Nov. 5 stated that LFI was not to conduct business at these locations until the court approves the assumption or rejection of the leases. Mendola had told SNEWS on Oct. 31 in a brief call that he hoped to be open for business by Nov. 7. SIince then, Mendola has not responded to emails or calls to comment about the week's actions.
The LFI Holding company was formed on September 2008 with Mendola, a former partner of Leisure Fitness and now owner of specialty retailer Key2Fitness. Also part of the LFI company is Paul Bastianelli, Leisure's CFO and strategic advisor through April 2008, and Dave Ford, a partner with Bastianelli in his company Strategy House Inc.
The Delaware court overseeing the involuntary Ch. 7 bankruptcy action allowed the bank, Wilmington Trust, to move forward on foreclosing on its assets in late October after several weeks of filings and motions following the initial Sept. 9 filing. Click here to see that Oct. 27, 2008, SNEWS story, "Leisure's motion to dismiss involuntary Ch. 7 denied; bank moves forward to sell assets, recoup losses." Leisure had built itself into a 19-store chain when it closed suddenly on Sept. 19 after owners could not meet payroll.