Nutri/System Close To Reorganization Deal

PHILADELPHIA - Nutri/System Inc. could emerge from bankruptcy with new ownership by mid-September under an agreement between the diet chain's bank lenders and Chicago investor Michael Heisley.

Under the agreement, Heisley's Heico Acquisitions Inc. would buy the assets of the Blue Bell, Pa., diet center chain from the seven bank lenders, which have liens on them as collateral for $37.1 million worth of outstanding debt.

Heisley yesterday refused to say how much he would pay, but he said the assets "appear to be (worth) less" than the debt.

The company, which was forced into bankruptcy May 4, has not yet filed the formal schedule of assets and liabilities required in bankruptcy cases. However, the company's June operating statement, filed with bankruptcy court in Philadelphia, included a balance sheet listing assets at $25 million.

That means the sale proceeds are unlikely to pay off the banks or to provide any money for unsecured creditors, which include the IRS, employees whose paychecks bounced and trade creditors such as food vendors and television stations. It also means the company's nominal owners - Donald McCulloch Jr., Albert DiMarco, Irene DiMarco and Reef Ivey II - also would get nothing, since their shares are worth nothing.

Heisley, who was negotiating to buy Nutri/System before the bankruptcy filing and has run the company since May 13 under the aegis of bankruptcy court, said the shareholders would agree to the

sale.

The franchisees, who operate the bulk of Nutri/System's centers, do not oppose the sale to Heisley, according to their attorney, John Francis Gough. The unsecured creditors have not yet taken a position on the request, said their attorney, David Ravin.

A hearing is scheduled for Aug. 18 on the major step toward the sale.

Heisley said that under his ownership, the core business of Nutri/System would continue to be weight-loss programs built on company-supplied foods. However, he said the company would broaden its focus to include more emphasis on exercise and long-term weight maintenance.

A broader range of services, as well as a wider food selection, would be introduced in January, the big season for weight-loss sales, he said.

Heisley said, he will concentrate on reopening more of the company-owned centers that were shut in April. Of the 283 centers that ceased operation, about 25 have reopened in Virginia, Maryland, New York and St. Louis. About 800 centers are operated by franchisees around the country.