The court overseeing the Chapter 11 bankruptcy reorganization of Fitness Holdings International has approved a second delay in the filing of its reorganization plan. The plan was initially due March 2, 2009. The court in March approved a delay to May 19 due to a pending hearing on its further use of cash collateral and a potential sale of as many as seven of its remaining stores.
In a hearing May 13, the U.S. Bankruptcy Court, Central Division of California, Los Angeles Division, approved a further delay of the hearing on the reorganization plan to July 28 based on FHI stating it now had a possible sale of as many as 23 of the remaining stores.
The company, which filed for Ch. 11 on Oct. 20, 2008, has closed approximately 85 stores, including its entire eastern Omni Fitness division. Click here to read a Feb. 25, 2009, SNEWS® story, “FHI to gut business.” As of May 18 per its website, 24 stores remained under the Busy Body flag — 20 in California, three in Colorado and one in Alaska, while the Omni Fitness website listed one store in Nashua, N.H.
“The goal of any transaction is to achieve a recovery materially in excess of liquidation value,” the court filing by FHI stated.
In addition, the filing stated that negotiations continued with a potential buyer and FHI and its representatives expected to present the agreement to the court “in the near future.”
Meanwhile the committee of unsecured creditors has taken advantage of its allowance to hire its own legal counsel, according to court filings. Eric Johnson, partner in the international legal firm Holme, Roberts & Owen LLC (www.hro.com) which is not affiliated with the FHI case, told SNEWS this is typical in larger bankruptcy cases since the expenses of the committee, including any legal counsel or additional accounting, must be paid by the debtor.
“It’s designed to be the counter-balance” to the debtors accounting and information, said Johnson, who is based in the firm’s Denver office and who specializes in bankruptcy, financial reorganization and creditors’ rights. “It’s a positive development for the creditors as a whole.”
He said the hiring of the counsel, approved by the court April 13, means only that the committee wants to conduct its own investigation and accounting of the reorganization proceeding. The court filing noted that the committee, of which Tom Staub of PaceMaster is chairman, had already carried out an investigation into “certain pre-petition transactions.”
The court documents so far reveal very little of what the committee and its counsel are investigating or hope to find, and Staub has not returned numerous calls and emails from SNEWS. Johnson said it’s not unusual for the committee not to say too much during the process since it is simply investigating, watching, researching and trying to make sure its members feel enough is being done to recoup as much money for the creditors as possible.
Once the debtor and the court progress further, Johnson said, the committee can use its legal option to seek additional relief from or examinations by the court, depending on how its members feel about the proposed settlement, transactions or outcome.