Leiner to Lighten Massive Debt
Squeezed by a mountain of debt and shrinking sales and profit, Carson-based Leiner Health Products Inc., one of the world’s largest vitamin and supplement makers, filed Thursday for Chapter 11 bankruptcy protection.
The company’s filing in Bankruptcy Court in Delaware listed assets of $353.1 million and debts of $493.6 million.
The privately held company said it is in discussions to lighten its massive debt load by persuading bondholders to swap $85 million in senior subordinated notes for $15 million in cash and preferred stock. In addition, a group of investors led by North Castle Partners, which holds a controlling interest in the firm, has agreed to invest an additional $20 million in the company.
Robert Kaminski, chief executive of Leiner, said the vitamin maker was carrying too much debt in a market hamstrung by slow growth, eroding profit margins and burgeoning competition.
“There has been a lot of price pressure in our industry,” Kaminski said. “A lot of it is due to overcapacity.”
David Coles, Leiner’s chief restructuring officer, described the reorganization plan as a so-called prepackaged bankruptcy that has already won the support of the company’s major creditors. The Bankruptcy Court must approve the plan. Still, Coles said he anticipates Leiner will emerge from Chapter 11 within 45 to 60 days.
The Chapter 11 filing comes on the heels of a major restructuring at Leiner last year that saw the vitamin maker fire 800 employees--about one-quarter of them in California--and shutter three manufacturing facilities in Florida, Michigan and Canada. The company currently employs 2,000 workers. Locally, the company maintains its headquarters, a research center and a packaging plant in Carson, along with a tablet-making facility in Garden Grove and a vitamin E soft gel plant in Valencia.
For the most recent quarter ended in December, Leiner posted revenue of $146.4 million, down 8.2% from the same quarter in 2000. Net income was $11.1 million, down 15.6% from the same quarter in 2000.
Leiner, along with many of its competitors, has been hammered by a slowdown in the $17.6-billion U.S. market for vitamins, minerals, herbs and other supplements.
Industry watchers said the slowdown has been particularly hard on Leiner because of its huge debt load and concentration in mass-market retailers, where the price pressure has been the most intense. Likewise, the company’s mainstay products are basic vitamins, a segment that grew a sluggish 1% to 2% last year, according to Patrick Rea, research director for the San Diego-based Nutrition Business Journal.
“Certain categories such as sports nutrition and weight-loss products are growing strongly,” Rea said. “But that’s not Leiner’s main business.”
