Specialty fitness retailer Busy Body is heading into turbulent seas -- rough enough that the chain may simply disappear from the radar despite its pledge to exit Ch. 11 bankruptcy protection by November.
The only positive note is that rumors that the company filed for Chapter 7 bankruptcy are not true. However, barely a month after senior vice president Scott Egbert quietly resigned, CEO Malcolm Menter has stepped down.
According to Thomas Staub, vice president of Aerobics Inc. and chairman of the creditors' committee, Menter resigned Sept. 7 when he found that Rice Capital wasn't going to put any additional funding into the struggling Texas-based chain to help it get on its feet again.
But that's only the beginning, Staub told SNEWS. Without an infusion of money, the chain's future is bleak.
"Rice Capital has not made a firm commitment to inject capital into the company to allow it to come out of Chapter 11," he said. "In light of that, the creditors' committee is exploring" other possibilities.
Those possibilities, he said, include landing new equity investments, selling off stores to strip the chain down to survival mode, finding a purchaser, or liquidating entirely.
"At this point we haven't made a firm commitment on any of those choices," he said. "But the long-term survivability is uncertain."
With the busy season for fitness coming up, the committee is bound to act quickly, he said.
Ernie Cutter, CFO, who is now acting CEO, denied the company is in a tighter spot than expected, maintained it will still exit Chapter 11 "before the busy season," and expressed some hard words about the continued rumor of Chapter 7. He said the company has tightened operations and cut back on overhead. "All 70 of our stores make money," said Cutter, who also insisted to SNEWS he was president despite a message on his voicemail as of Sept. 13 that called him CEO. The company's web site as of Thursday Sept. 13 still listed Menter as its CEO.
Cutter did say that the company intends to divest itself of stores in more markets, but wouldn't disclose how many that could be. "We're selling off markets," he said, "and we're going forward."
Busy Body owes the cumulative fitness industry about $17.8 million, with the biggest debt to Precor weighing in at about $6.6 million, Staub has said. Staub says his small company -- maker of the three-item Pacemaster treadmill line -- is due $2.1 million.
SNEWS View: With the busy season bearing down faster than one can say "Spinning," it seems unlikely that the creditors will be able to find a buyer and bring a deal to fruition fast enough. Finding funding is an outside possibility. Holding a fire sale and paring down the current 70-store chain to a dozen or so stores seems the most likely way for companies like Precor and Pacemaster to get some percent of their money back. But if Rice Capital isn't willing to stand behind the chain, get ready for large "liquidation sale" and "everything 20-80 percent off" signs plastered in Busy Body windows everywhere.
If you take a gander to the website -- www.busybody.com -- you'll find this statement on the page called "Vision:" "Financial objectives are consistently achieved due to superior planning, execution, and teamwork." Let's see, planning is scattered, execution is non-existent, and teamwork? What team?