Nutrisystem, Jenny Craig Owner Wellful Prepares A Debt Overhaul

11/8/2024 7:00:50 PM

(MENAFN- Live Mint) (Bloomberg) -- Battling the increasing allure and accessibility of drugs like Ozempic, the company behind last-generation weight-loss and diet plans Jenny Craig and Nutrisystem is experiencing losses so sharp it's struggling to pay interest on its loans.

Wellful Inc., backed by private equity firm Kainos Capital, is consulting experts as it weighs options to address its debt load and huddles with creditors to discuss specifics, according to people familiar with the discussions, and has tapped investment bank Houlihan Lokey Inc. to manage the process.

A group of its creditors hired law firm Gibson Dunn & Crutcher LLP ahead of an expected proposal from the company, said the people, who asked not to be named citing private discussions.

Representatives for Wellful, Kainos Capital and Gibson Dunn did not respond to requests for comment, while a representative for Houlihan Lokey declined to comment. Debtwire reported earlier on the hires.

Elsewhere in the industry, Wellful peers are battling the same forces that have pressured its earnings. Weight Watchers Inc.'s stock is down almost 90% this year and its bonds trade at less than half of face value, even after it bought prescription-service platform Sequence in 2023. The vitamin supplement GNC Holdings LLC is asking its landlords for concessions on rent.

Wellful has approximately $550 million in debt due in 2028, stemming from Kainos' acquisition of a business that included Nutrisystem and the South Beach Diet for $575 million in 2020. For that buyout, Kainos raised debt through the combined company created by the acquisition. Last year, Wellful expanded by buying the Jenny Craig intellectual property out of bankruptcy for about $10 million.

In December, the company stopped paying cash interest on some of its debt, electing instead to pay-in-kind, deferring payments until 2025. Following that decision, Moody's Ratings downgraded the company's debt to Caa1.

S&P Global Ratings also downgraded Wellful's credit rating last month, saying that the company's earnings declined 30% in the first half of 2024 compared to the same period in 2023.

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