Monthly Archives: May 2015

MonaVie Financials Get Messy in Face of Loan Default Foreclosure

At one point, MonaVie was reaching nearly $1 billion a year in sales of its juice and other products, making it one of the largest network marketing companies in the world.

Oh how the mighty do fall.

The Salt Lake Tribune reports that a federal judge has issued a restraining order temporarily halting a deal that would transfer most of Monavie’s assets to a Florida company that foreclosed on MonaVie after they defaulted on a $182 million loan, for which MonaVie had placed most of its assets as collateral.

Of course, it’s more complicated than that.

MonaVie took out the loan in November 2010 from a company called TSG-MV Financing LLC. The loan was supposed to be paid in full by June 2014, but when it wasn’t, TSG-MV sold the note to Legacy Alliance Partners LLC, which has the same principal officers as Jeunesse Global LLC, another direct selling company that, coincidentally (?), announced in March that it had purchased MonaVie.

Under the terms of the “strict foreclosure” agreement, MonaVie turns over almost all assets to Legacy Alliance Partners and erases all shareholder value.

BehindMLM does a pretty good job of summarizing this in plain English…

So basically you have Monavie riddled in debt, Jeunesse buying some of that debt from TSG-MV Financing LLC and telling everyone it’s going to be business as usual… and now less than two months later announcing a foreclosure because Monavie can’t pay its debt…

Clever.

Now, ordinarily I wouldn’t feel bad for the shareholders of MonaVie. They gambled and lost. Of course the value of a defaulted loan comes off the value of the stock. That’s what happens.

But as so often happens in these cases, the collateral damange is the MonaVie employees who were part of the company’s employee stock ownership program (ESOP). The proposed class action lawsuit filed on behalf of employees who were part of the ESOP against Bankers Trust, the trustee for the company’s ESOP), claims that MonaVie principals sold $186 million in shares to the ESOP, but that the shares quickly fell nearly 100% in value. The suit alleges that Bankers Trust failed in its fiduciary duties by allowing MonaView to sell the shares at a highly inflated value using a loan with an inflated interest rate. Bankers Trust, in turn, has turned around and sued MonaVie.

Troy Dooly summarizes this in plain English:

It seems on the surface that the majority of MonaVie shares were sold to the hardworking employees of MonaVie, while the assets of MonaVie which were for the most part the only real value of the shares, were sold (I guess I should say mortgaged) off to another group, without the knowledge of the one group that should matter most… the EMPLOYEES!

And BehindMLM:

Needless to say there was also probably some major shenanigans going on between Monavie’s Founders and Bankers Trust. How else did they convince them to pay $182 million dollars for worthless shares, only to bail on the company a few years later.

What a tangled web they weave.

MonaVie doesn’t appear to be going anywhere, or Jeunesse. MonaVie distributors have ended up with more products to sell and, at least for now, a more economically stable company. But that shouldn’t be at the expense of MonaVie employees and the benefit of the pocketbooks of Jeunesse major shareholders. Jeunesse can take the financial hit — those employees can’t.