Global Health Files Chapter 11 to Hasten Sale
Health supplement maker Global Health Sciences Inc., which has trimmed its work force by 800 and defaulted on $225 million in debt, sought protection from its creditors Monday in a bankruptcy filing designed to speed the sale of its operations.
Before falling on hard times last year, the Orange company had been the largest supplier to Herbalife International Inc. Sales to Herbalife, the large Los Angeles distributor of herbal and weight-loss supplements, had accounted for more than half of Global’s business.
The relationship soured after Herbalife founder Mark Hughes died last year, and Global defaulted on $225 million in bonds in November.
In lawsuits, executives of both companies traded allegations of wrongdoing. Since November, Global has laid off about 400 permanent workers and let go about the same number of temporary employees, said Tom Murphy of Murphy Noell Capital LLC of Westlake Village, Global’s financial advisor.
Global currently has about 500 full-time employees, Murphy said.
Herbalife said in a prepared statement that it was not responsible for Global’s bankruptcy, that it had bought more Global products than required under a contract that expired Dec. 31, and that it had tried for six months to arrange additional purchases. Herbalife said it “continues to be in communication with Global Health Sciences through its attorneys.”
Global’s Chapter 11 bankruptcy filing seeks to have the company’s entire operations sold to the highest bidder.
Murphy said Global has held preliminary discussions about a sale with “a number of interested parties,” adding that he is hopeful of an “expeditious outcome.”
If the bankruptcy proceeding turns out as Global hopes, its creditors will be left to fight over the proceeds of the sale while the buyer gains unencumbered control of Global’s operations.
With interest, Global’s bond debt has grown to about $240 million. The bonds have been trading for about 10 cents for every dollar of face value, indicating the holders have little hope of recouping their principal.
Global also has about $28 million in debt to five banks that would be first in line to be repaid, and $10 million to other creditors who, like the bondholders, are unsecured.
A hearing is scheduled for Wednesday before U.S. Bankruptcy Judge Robert W. Alberts in Santa Ana.
