Atkins Nutritionals files for Chapter 11

New York, Aug. 1 - Atkins Nutritionals, Inc. made a pre-packaged Chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of New York on Sunday.

The New York-based diet company said the filing follows an agreement reached with "the overwhelming majority" of its bank lenders.

The lenders will receive all the equity of the reorganized company in exchange for a "substantial reduction" in its outstanding debt.

"We are pleased to have reached this milestone with such strong support from our Board of Directors, equity sponsors and lender group," said Mark S. Rodriguez, president and chief executive officer of Atkins, in a news release.

"In the past year we have adjusted our organization to accommodate a smaller business and have begun to position the Atkins brand more broadly for consumers who are concerned about health and wellness."

In its filing, Atkins listed assets of $301 million as of Dec. 31, 2004 and liabilities of $325.1 million. The net loss for 2004 was $340.9 million, including an impairment of intangible assets of $291.7 million.

At the time of filing for bankruptcy, Atkins owed $300.59 million on its credit agreement, made up of $208.00 million in principal and interest on a first-lien term loan, $84.15 million in principal and interest on a second-lien term loan and $8.44 million in principal and interest on a revolver.

UBS Securities LLC was bookmanager and lead arranger, UBS Loan Finance LLC was swingline lender and UBS AG, Stamford Branch was issuing bank, administrative agent and collateral agent for the facility.

The largest unsecured creditor is CVS Pharmacy, Inc. of Woonsocket, R.I., with a customer claim of $2.40 million followed by United Natural Foods, Inc. of Dayville, Conn., with a customer claim of $1.38 million, BAL Global Finance, LLC of Chicago with a financing agreement claim of $1.29 million, Bremner, Inc. of Chicago with a trade claim of $1.28 million, and Parthenon Capital of Boston with a $1.16 million claim for management fees. All other unsecured claims were for less than $1 million.

Atkins has a commitment for a $25 million debtor-in-possession facility from UBS. It noted that this was the "only viable" proposal for an asset-based facility.

The DIP will be structured as a $25 million revolver, with $10 million available on an interim basis. Availability will be subject to a borrowing base.

Interest is at Libor plus 400 basis points and the maturity date is April 30, 2006. The facility has a 50 basis points commitment fee.

Proceeds can be used for general corporate purposes.

Atkins also requested approval to hire Jefferies & Co. as restructuring advisor.

Atkins' case number is 05-15913.

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