Diet company Atkins files for bankruptcy

Atkins Nutritionals, the company that promoted low-carb eating into a national diet, filed for bankruptcy protection Sunday.

Atkins has been hurt by waning popularity of its namesake diet, which focuses on eliminating carbohydrates such as bread and pasta as a way to lose weight. The diet quickly became one of the most popular in U.S. history, spawning numerous derivatives and a virtual cottage industry of low-carb regimens - but it drew criticism from many experts for its focus on fatty foods, low fruit, and vegetable consumption.

A hearing on the prearranged, Chapter 11 filing was scheduled for Monday in U.S. Bankruptcy Court, spokesman Richard Rothstein said. The privately held company, founded in 1989 by Robert C. Atkins, said it had reached an agreement with the majority of its lenders to give them equity in exchange for lowered debt.

The company listed assets of $301 million and liabilities of $325 million in papers filed with the U.S. Bankruptcy Court in New York. Atkins owes UBS Securities LLC and other lenders roughly $301 million under a 2003 loan, according to the papers filed Sunday.

“The low-carb fad has gone," Michael Steib was quoted as saying by Bloomberg, a consumer-goods analyst for Morgan Stanley in London. “Dieting habits are very short-lived. It came very quickly and disappeared very quickly," he added.

Foodmakers including Unilever and Kraft Foods Inc. were hurt in 2003 and 2004 as U.S. consumers began to monitor their weight by limiting their sugar intake, as is advocated by Atkins' diet plan. The companies retaliated by introducing their own line of low-sugar foods, such as Unilever's Carb Options line and Kraft's South Beach diet meals, and the competition hurt Atkins' company, Bloomberg reminds.

The Ronkonkoma, New York-based company has reached an agreement with UBS and other lenders under the 2003 loan on the basic terms of a plan to restructure the business and repay creditors, Roof said in court papers. Atkins intends on completing the agreement and filing a plan “in the near term.'”

UBS has also agreed to provide a $25 million loan. Atkins will use the financing to pay expenses during its bankruptcy case. The company hired Weil Gotshal & Manges LLP as bankruptcy counsel.