The bankruptcy court overseeing the involuntary Chapter 7 bankruptcy against Leisure Fitness has rejected a Sept. 29 motion to dismiss the filing and is allowing the bank to move ahead to sell assets.
In addition, two bidders are looking to gain some amount of the assets from the bank in a sale overseen by the U.S. Bankruptcy Court, District of Delaware, and the court has appointed a permanent trustee to oversee the case as it proceeds.
The court's rejection of the motion to dismiss the case by the attorney for owner Katina Geralis came on Oct. 23 at the latest hearing in the case, but the order was not signed and filed until Oct. 27. The motion had claimed the Sept. 9 filing by creditors Eric DePaul, John Sutcliffe and InFlight Fitness for a total of $26,900 was "not well-founded," "in bad faith," and was "for the improper purpose of attempting to gain control over the assets of Leisure Fitness at liquidation value." (Click here to see an Oct. 6 SNEWS® story.)
"I'm ready for this to be over," Geralis told SNEWS, who said she will be working in the next few weeks to tie up the business books and other affairs. "I want everything to be dismantled properly."
The three initial petitioning creditors, joined later by suppliers Pro-Elite for $13,353 and Atlantis for $102,696, in their response denied any interest in gaining control or influence over Leisure, which shut its 19 stores' doors suddenly Sept. 19. The creditors said in a court filing that "Leisure relies wholly on bald recriminations that the involuntary petition is irreparably tainted and beyond salvation...." (Click here to see an Oct. 20 SNEWS story.)
In the Oct. 23 hearing, the court had a long list of matters to consider, forcing the hearing to go all morning and afternoon. The court granted the motion of the bank, Wilmington Trust Company (WTC), for relief from its stay placed upon it by the court. The court modification now allows the bank "to take all actions necessary or appropriate to exercise its rights as a secured creditor in the WTC collateral including, without limitation … to sell or cause the sale of WTC collateral to one or more successful purchasers and … to permit the proceeds of WTC collateral to be applied to the debtor's obligations …."
According to court documents filed by WTC, the bank's representatives stated Leisure owed it an amount equal to nearly $6.3 million although the assets were worth much less than that by mid-September.
Insiders tell SNEWS that bidders for some portion or combination of stores or assets include LFI Holding LLC, with Ron Mendola as a principal in the Delaware corporation registered on Sept. 26, 2007; and Carlos Vazquez, of Florida-based Busy Body/Gyms to Go. Sources told SNEWS that working with Mendola is Paul Bastianelli, Leisure's CFO and strategic partner since the business began until he left Leisure in late spring.
The court has set a series of omnibus hearings to have the opportunity to hear a variety of matters as needed. Those are now scheduled for Dec. 16, 2008; and Jan. 13, Feb. 10 and March 10, 2009.