A large Southern California nutritional supplement company is in dire financial trouble after losing much of its business supplying Herbalife International Inc. after the sudden death of Herbalife founder Mark Hughes in May.
Orange-based Global Health Sciences Inc. faces a Nov. 1 deadline to make a $12.4-million interest payment on $257.8 million in debt or it will go into default, according to Standard & Poor's, a credit rating service that downgraded its assessment of Global's health last week.
A default would threaten the company with bankruptcy, endangering more than 1,300 jobs at plants in Orange and Anaheim.
Global is owned by Richard Marconi, a longtime Hughes business associate and one of the first formulators of Herbalife products.
Herbalife also has quietly cut ties to another longtime Hughes associate, Michael E. Rosen. In June, the nutritional supplement company fired Rosen, a Herbalife executive vice president who once was Hughes' reform-school advisor, and failed to renominate him as a director in July. Herbalife officials declined to talk about the break with Rosen, who was paid $3.4 million last year. Rosen could not be reached for comment.
Just three years ago, Global manufactured all of Herbalife's nutritional products. The business relationship was still growing earlier this year, but soured after Hughes' death following a four-day drinking binge.
Ironically, a portion of Global's debt resulted from a buyout of Hughes' interest in its predecessor companies for $43 million in 1998. Marconi was paid $38.6 million in the same transaction.
The moves to distance Herbalife from Marconi and Rosen appear to have been orchestrated by Christopher Pair, Herbalife's former chief operating officer and also a longtime Hughes associate. He became chief executive shortly after the death. Pair declined to be interviewed.
Herbalife is a Los Angeles-based marketer that relies on a network of more than 100,000 independent distributors, most of them working part time, to pitch the company's line of personal-care and weight-loss products to neighbors, co-workers and relatives. It has about 1,000 employees in Southern California and about $1 billion in annual sales.
Global could lose all its Herbalife business as early as January, according to Securities and Exchange Commission filings. Herbalife is actively shifting its business to other suppliers to "secure quality products at competitive prices."
