Atkins Nutritionals emerges from Chapter 11, introduces new strategy

By Caroline Salls

Pittsburgh, Jan. 10 - Atkins Nutritionals, Inc. emerged from Chapter 11 bankruptcy Tuesday and has introduced a new business strategy, according to a company news release.

The new business strategy focuses on providing portable foods with a unique nutrition advantage to healthy, active men and women, which is a distinct shift from its pre-bankruptcy strategy of educating the population about the benefits of controlled carbohydrate nutrition, the release said.

As part of its repositioning efforts, the company has committed $40 million to promote Atkins Advantage and its unique nutrition advantage.

"We are pleased to have accomplished so much in five months," president and chief executive officer Mark S. Rodriguez said in the release.

"Our new management has streamlined operations and built a foundation for strong financial performance. We've streamlined everything to reduce cost - from our product offerings to our supply chain."

Under the company's plan of reorganization, which was confirmed on Dec. 21 by the U.S. Bankruptcy Court for the Southern District of New York, general unsecured creditors will recover 15% of their claim in cash.

The reorganized company will issue $110 million in new five-year pay-in-kind tranche A notes with an interest rate of Libor plus 1,200 basis points and will issue 15 million shares of new stock, 10 million of which will be distributed to holders of first- and second-lien secured claims.

The remaining 5 million shares will be reserved for future use.

Of the total interest for the new tranche A notes, Libor plus 500 bps will be paid quarterly in cash and 700 bps will be paid in cash or new notes, at the company's option.

Plan creditor treatment

Treatment of creditors under the plan will include:

• Holders of $792,000 in priority tax claims will receive 100% recovery in cash;

• Holders of $40,000 in priority non-tax claims were also slated to recover 100% in cash under the first amended plan, but the new plan estimates there will be no claimants in this class;

• Holders of $216.4 million in first-lien secured claims will receive their share of the reorganized company's new tranche A senior notes and 8.4 million shares of new stock in the reorganized company;

• Holders of $18 million in second-lien secured claims will receive 1.6 million in new stock and contingent value rights interests;

• Holders of $641,400 in other secured claims will receive 100% recovery in cash or surrender of the underlying collateral securing their claim;

• Holders of $23.6 million in general unsecured claims will recover 15% of their claim in cash.

• Holders of old equity interests will receive no distribution under the plan.

The company planned to secure a new $25 million three-year working capital exit facility from UBS as agent and a syndicate of lenders to be determined.

According to the release, Atkins has improved on-time deliveries to its customers to an average of 96% over the last 180 days from 64% last year. The company has reduced its product offering to 60 nutrition bars and shakes from 340.

Atkins, a New York-based diet company, filed for bankruptcy July 31. Its Chapter 11 case number is 05-15913.

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