AJC Article Discusses Spa Sydell Chapter 11 Filing
Spa Sydell, the well-known day spa in Atlanta, filed a Chapter 11 bankruptcy petition in Atlanta on September 3, 2009. In re Sydell, Inc., Ch. 11 Case No. 09-83407-crm (click here to download 117 page petition). Not only is Spa Sydell in business at all locations, it has plans to open a seventh location in Roswell.
The AJC has posted an article by Rachel Ramos and David Markiewicz.
In its 117-page bankruptcy petition, the company listed $4.3 million in debts and $5 million in assets. The filing shows a decline in gross income to $16.2 million in 2008 from $19.1 million in 2007. In 2009, year-to-date sales were $9.3 million through May. Atlanta bankruptcy attorney Scott Riddle said spending on luxury items such as spa treatments has fallen in the recession...
The bankruptcy filing lists $2.25 million in unsecured debt. Of that, $743,000 is owed on leases for the six retail locations. Hundreds of unsecured creditors are listed, mostly for trade debt, from radio station and newspaper advertising to business cards, shipping and catering. The only secured creditor listed is BB&T, with a $1.8 million loan. The company also owes the Georgia Department of Revenue more than $200,000.
As I noted to Rachel, spending on "luxury" items are down in this economy as people have to tighten their belts to make house payments or rent. A trip to the day spa could be two weeks of groceries for the family. If we project Spa Sydell's 2009 income (noting that the petition states the $9.3 million income is through the petition date, not May), and compare it with 2008, income is down about 24%. That is a significant amount for a retailer, and could lead to a significant rise in debt, as reflected in the petition.
However, Chapter 11 provides the Spa with an opportunity to save a significant amount of money by rejecting, or terminating, leases that are unfavorable. It is likely that Spy Sydell, like many other businesses, leased commercial space at a time when rates were much higher than they are today. In some instances, the same space next door might be leasing for half of what a debtor is currently paying for its three or four year old lease. The Bankruptcy Code allows a debtor to reject these bad leases and either move to another space, or to negotiate a much lower rate with the current landlord, who no doubt will not want to have empty space.
The savings on leases for a debtor with several locations could alone be enough for a debtor to successfully reorganize.
One bright spot for Spa Sydell is that spending on personal grooming is actually rising, according to studies in the Wall Street Journal Wallet Blog:
As car sales have plummeted, shopping online has climbed 8.6% in the last 12 months. More people are spending on gym memberships (up 6.7%), bar drinks (up 5.8%) and sports and hobbies (up 4.7%). Dining at full-service restaurants is up 3.1%, and personal care — haircuts, massages and manicures — is up 2.5%.
“I think people are looking for comfort in small things,” says Melinda Crump, a spokesperson for Sageworks. “You may not be able to take a vacation in Tahiti or Hawaii, but you can join a gym.”
Scott Riddle’s practice focuses on bankruptcy and litigation. Scott has represented Chapter 7 and 11 debtors, creditors, trustees and other interested parties in bankruptcy cases and bankruptcy litigation. For more information, click here.
Uh its about time, They haven't been able to pay their employees for 2YEARS! Many long time employees have left, most are so spineless to report to Georgia Labor Law, the payroll checks always bounces and the company never apologize or repay for overdraft fees, The Harris family need to realize the economy is down we are in a recession stop pretending to be the Elite of Atlanta their old way of doing things is over! They can't get credit anywhere, if they order products they must prepaid upfront
their credit is so bad all over town. Park Place padlocked the location when the lease payment bounce- I worked there a year ago, I left because of my MONEY i don't play with you mess with that, I almost did a Rambo LOL, still some of the employees deal with it every 2wks damn shame!
Spa Sydell is a joke, Reina Burmeduz(CFO) is a crook who continues to draw a paycheck from the mass90 account while employees struggle to get along with one paycheck a month which usually bounces.
the company works the Directors to death constantly bitching and moaning about sales, sales, sales...try being motivated to sell while trying to figure out how to feed your family and pay your bills. they treat their employees like crap! Stop purchasing from this company, what you dont know is they are about to go under...BEWARE!
If DarealDiva is to be believed i don't understand how they have any staff left, there are other jobs out there people move on.
But bar spending is up 5%, time to buy those beer shares i was thinking about lol
I agree with Diva and Over. The employees are run into the ground and rewarded with paychecks that bounce. The Harris' pranced around as though nothing was wrong while spending mass amounts of the company's money on themselves personally. Reina Bermudez, the CFO, is just as bad if not worse. She allowed the spending to continue and even drives a BMW the company pays for. Why is it that she can drive a new BMW and draw a paycheck while the company is in such a financial crisis? Seems to me like she should be terminated for not doing her job correctly. It'd do her good to go through what she has put many employees through....not getting paid.