Financial Review reported:
Weight-loss brand Jenny Craig has begun liquidating its operations in the US after efforts to ease a cash crunch fell short.
Jenny C Holdings and affiliates filed for Chapter 7 bankruptcy on Friday in Delaware, court papers show. The move means Jenny Craig will cease operating and see its assets sold off in pieces.
The company, backed by HIG Capital, struggled to maintain enough cash in recent months as it stared down a first-lien term loan due in October 2024. It has searched for a buyer and held active discussions with lenders in an attempt to rework roughly $US250 million of debt.
The struggling diet company’s Canadian division previously commenced liquidation proceedings in Vancouver, listing about C$324 million ($242 million) owed to unsecured creditors.
The article did not mention another private equity underwriter (PEU) North Castle Partners.
North Castle Partner's website still has information on Jenny Craig. North Castle's narrative reads like it still has a stake in Jenny Craig.
HIG Capital scrubbed the company from its website. It is not on the list of current or realized investments.
I was unable to find a debt rating for Jenny Craig or Jenny C Holdings so it must exist under another name. The rating reports may shed light on how HIG and North Castle bled Jenny Craig for cash.
PEU's tend to make back their original equity investment within the first few years between deal fees, management fees, selling real estate, special dividends/distributions and adding debt while paying a portion to the sponsor (debt for dividend). There is no information on the mix of cash removal strategies HIG and North Castle foisted on Jenny Craig.
Jenny Craig has a rich PEU history having been owned by MidOcean Partners and ACI Capital.
Looming debt refinancing may take down many a PEU affiliate. The greed and leverage boys refuse to use their ample dry powder on companies they've tanked. PEUs don't throw good money after bad, even if they caused the company to falter by fattening up the liabilities side of the balance sheet.
Update: EpsilonTheory has an excellent analysis of the failure of a different retailer Bed Bath and Beyond. BBBY was publicly traded in contrast to Jenny Craig. I expect there are some similarities in the way executives and owners profited handsomely and contributed to the company's decline and eventual death.
Update 5-17-23: Jenny Craig debt holders include CION Investment Corp and Brightwood Capital Advisors. CION's SEC filing shows a Jenny C Acquisition with interest rate Libor + 900 basis points.
Jenny Craig operations in Australia and New Zealand remain open.
