Investors Given Nutri/System Reins

PHILADELPHIA - Nutri/System Inc.'s operations were turned over to prospective investors today as a bankruptcy court judge dismissed the trustee appointed to run the company.

Chicago-based Heico Acquisitions will control the franchiser of weight-reduction centers while negotiating to buy the company, with a group of Philadelphia-based investors as minority partner.

"This case started out on an odd foot and is still in an unusual position," said Judge David Scholl. "We don't really know if we're going to have a bankruptcy case."

Nutri/System was forced into bankruptcy proceedings last week. The company closed 283 weight-loss centers and its Blue Bell, Pa., headquarters and laid off 1,800 employees after a group of banks seized its cash and bank accounts April 27.

The seven banks that seized Nutri/System's assets all supported the judge's move to shift control to the potential investors, along with franchisees, major creditors and current owners of the company.

Michael Heisley, a principal in Heico Acquisitions, which specializes in buying distressed businesses, had said last week that he reached an agreement to buy closely held Nutri/System, but the judge said the prospective investors had missed a deadline to propose their plans and appointed the trustee.

Some franchisees in court today said they are running out of diet food at their stores. Nutri/System relies heavily on the sale of prepared foods to dieters who are required by contract to purchase the meals.

The trustee said that he arranged over the weekend for food to be shipped and that it should be received today.

"We must get together with managers and expedite the shipping of food to franchisees," Heisley said.

Although Nutri/System closed its company-owned centers, 857 franchises and the separate, debt-free Nutri/System Canada continued to operate.

Heisley said he does not expect all of the company-owned Nutri/System stores to be reopened. He didn't estimate how many will remain closed.

"We're going to bring people back as we have jobs for them to do," Heisley said.

Nutri/System is attractive because it posted profit of $126 million as recently as 1990, Heisley said. Franchise revenue is about $30 million a month, said David Skulnick, who owns franchises in New Jersey and Illinois franchises.