GNC unsecured creditors committee concerned over bid protections

By Caroline Salls

Pittsburgh, Aug. 17 – GNC Holdings, Inc.’s official committee of unsecured creditors objected to the designation of a stalking horse bidder for the proposed sale of the company’s assets and the payment of requested bid protections, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee said GNC’s proposed bid protections include a $22.8 million break-up fee and a $3 million expense reimbursement, in addition to minimum overbid protections including a $5 million minimum overbid requirement.

“The committee supports a fair and competitive auction process intended to encourage all prospective bidders to put their best bid forward and acknowledges that, where structured properly, a stalking horse bid often serves the function of setting a floor for further competitive bidding that can help protect jobs and maximize value for all constituents,” the objection said.

“However, the committee does take issue with the excessive break-up fee and the initial overbid – particularly given that case law in the Third Circuit is abundantly clear in holding that in transactions where the debtor seeks to sell substantially all of its assets to an insider, bid protections are subject to strict scrutiny.”

Given stalking horse bidder Harbin Pharmaceutical Group Holding Co., Ltd.’s insider status, and since the committee has not completed its investigation into GNC’s pre-bankruptcy relationship with Harbin and the circumstances surrounding the negotiations that led to the non-binding term sheet between the parties, the committee said it was reserving its rights regarding those issues.

“The proposed bid protections are not conducive to a robust auction and sale process; they discourage competing bids where the paramount goal should be maximizing the value of the estates,” the objection said.

GNC Holdings is a Pittsburgh-based health, wellness and performance retailer. The company filed bankruptcy on June 23 under Chapter 11 case number 20-11662.

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