Pending Nutri-System Deal Hits a Snag

The confusion surrounding Nutri-System Inc., the debt-ridden chain of weight-loss centers, deepened Monday when its pending sale to a Chicago investment firm ran into unexpected opposition.

Nutri-System court-appointed trustee John T. Carroll said Monday that he intends to fight the sale to Chicago-based Heico Acquisitions because it doesn’t cover the debt owed to unsecured creditors. Carroll said the unsecured creditors, a group which includes employees, are owed $8 million to $10 million.

A spokesman for Heico Acquisitions couldn’t be reached for comment. According to Carroll, Heico had agreed to manage Nutri-System Inc. for 30 days while it assessed the company’s condition. At the end of that time, Heico had an option to buy the company for an unspecified amount.

Carroll said it appeared that the agreement covered at least some of the $40 million owed to Nutri-System’s banks, led by Fidelity Bank of Lawrenceville, N.J. The banks have agreed to the deal with Heico.

Nutri-System Inc. has closed 283 company-owned diet centers and its food warehouse and is in involuntary bankruptcy proceedings in Philadelphia. Its 857 independently owned franchises remain open, despite an increasing shortage of prepackaged meals essential to the Nutri-System diet plan.

According to their attorneys, many franchisees have run low on food or are completely out of it. Carroll said Nutri-System warehouse employees are being rehired and that food shipments to franchises are expected to resume this week.

Meanwhile, Nutri-System customers throughout the Southland are searching for centers with food. An employee at a Nutri-System franchise in Palmdale said one customer drove for 90 minutes to reach the center to buy food.

At a company-owned center in Diamond Bar, an employee working without pay continued to sell food to anxious customers. The employee said: “Going on a diet is traumatic enough without this.”