With apparently no immediate options for new financing, Skinny Nutritional, the marketer of Skinny Water, a line of zero-calorie, electrolyte-infused waters, has filed for Chapter 11 bankruptcy protection in order to protect its brand name and other intellectual property rights from falling into creditors’ hands, the company announced on Wednesday.
The company claims that the filing was in response to “actions and increasing demands” from its primary lender Trim Capital. Skinny stated that Trim “failed to complete its financing obligations under an agreement which would have provided up to $15,000,000 in funding, funding only $1,270,000 of its obligations to the Company.” Following that failure, “Trim arranged a UCC foreclosure which would have resulted in the Company’s substantial intellectual property rights being lost to Trim,” Skinny said in its statement.
Michael Salaman, Skinny’s Chairman and CEO, said that the move to file Chapter 11, was a bid to preserve value for the shareholders, and that “in the absence he reorganization filing, the Company would be left without recourse.”
“The loss of the trademarks would have been devastating to the Company,” Salaman said. “We believe that the enterprise value of the Company can be saved and restored. The Company had no way of moving forward with a threatened foreclosure looming.”
Salaman said that Skinny is taking all necessary steps to secure its long term position in the industry and believes that future sales of Skinny water are “promising.” Salaman’s hopes for the company come despite a number of recent woes, including the resignation of most of its board, each of whom filed letters with the U.S. Security and Exchange Commission indicating their dismay at Salman’s management of the company.