Two months after a bankruptcy court approved a Ch. 11 reorganization plan by Keys Fitness ownership -- an approval that was voided a week later on the request of owners -- the private equity ownership group has asked for court approval to sell all Keys' assets at a fraction of their value.
Although owners Jacobson Partners (www.jacobsonpartners.com) declined comment on the motions or about Keys’ future, an approval by the court would effectively dismantle the fitness equipment company.
“I can’t comment on anything,” Steven Jaffe, vice president at Jacobson Partners and a Keys director, told SNEWS®. “We don’t comment about any of the companies we’re involved with.”
Days after Jacobson Partners Acquisition (JP) sought and received approval Sept. 11 of the reorganization plan stemming from the original Keys Fitness filing in mid-April (click here to see that Sept. 12 SNEWS® story), it returned to the U.S. Bankruptcy Court, Northern District of Texas, Dallas, to ask the judge to void the order and vacate confirmation of the plan.
Jacobson Partners, in that request, stated that “the institutional lender that had expressed an interest in extending exit financing … presented JP Acquisition with a revised term sheet that was unfavorable to” the company, the Sept. 19 filing explained. “Without exit financing, the Amended Plan could not be effectuated and would not be feasible. Due largely to recent events in the financial markets and a number of other factors, the Debtors and JP Acquisition have been unable to obtain exit financing….”
The filing noted voiding the confirmation approval would give the company time to formulate a strategy and consider alternatives.
In additional court documents filed by Keys Fitness ownership late in the day Nov. 14, JP requested the court approve two sales:
>> A sale of all Ironman-branded inventory to World Triathlon Corp. (WTC), the owner of the Ironman brand which had licensed the brand to Keys since April 2002. The agreement as presented would give WTC approval to purchase all 2009 licensed inventory at the Keys warehouse for 75 percent of the “landed cost,” which was approximately $791,000. The purchase price would therefore be $593,250. As a part of the deal, Keys would transfer to WTC right and title to all tooling equipment for the product. In addition, the parties would agree to terminate the license agreement and waive all claims.
JP notes in the document that the value of the inventory is at its highest in the holiday buying season and should be sold immediately.
>> A second sale of all other accounts to Hilco for 33 percent of the balances as of the date of the filing. The value was approximately $1.54 million, meaning the purchase price would be $508,504. If approved, Hilco also agreed to share part of the proceeds. Hilco (www.hilcofinancial.com) specializes in asset acquisition and disposition and was the company that bought the assets of Copeland’s in conjunction with The Sports Authority in 2007, and then conducted sales to close the stores and end the business.
A hearing on the motions to sell is set for Nov. 20.
On the afternoon of Nov. 14, the Keys Fitness facility in Garland, Texas, near Dallas, had about eight cars in the corporate lot with room for five times that many. The doors were open, and a UPS truck was backed up to the dock. However, calls by SNEWS to a number of corporate phone numbers and extensions went unanswered by a real person and were forwarded to recorded greetings and then to voicemails, which also were not returned.
Click here to read a May 19, 2008, story summarizing financial statements filed by Keys as a part of its April filing for reorganization, noting assets of $11.7 million and liabilities of $28 million. In January, a company representative told SNEWS that Keys was “not going away.”
SNEWS® View: Assuming the court approves the motions -- and we expect it will -- this could spell the end of a company that supplied not only a number of specialty retailers but also sporting goods stores. We also expect another manufacturer has likely already approached WTC to snap up the license for the Ironman brand -- a valuable one indeed that is immediately recognizable by most of the public, athletic or not, much like the Universal brand. Hilco will likely sell off the inventory and assets to another party, which will simply clear through the product. Keys Fitness, as the industry has known it, will be no more.