As we reported earlier today, Crunch is filing for bankruptcy and then proposing that it be purchased by its senior secured lenders, New Evolution Fitness Company (NEFC), founded by Mark Mastrov and Jim Rowley, and CH Fitness, an affiliate of Angelo, Gordon & Co.
Well, U.S. Bankruptcy Judge Robert Gerber, who was hearing the bankruptcy case in Manhattan this afternoon, apparently didn't like the deal. In fact, he called it "outrageous." He said that the plan violates bankruptcy laws. He also says that the plan didn't clearly spell out that the company was proposing that it be sold to CH Fitness, which is 92 percent owned by Angelo, Gordon—even though Angelo, Gordon currently owns more than 90 percent of the company's equity. The judge said that this plan appears to be the company selling itself to itself.
Crunch must provide the judge with an affidavit explaining the deal.
What do you think of the Crunch plan?