A Swiss court in Winterthur opened bankruptcy proceedings last May 9 for Masai Group International and Masai Marketing & Trading, the two companies that own the brand rights and run the global operations of MBT, the pioneering Swiss brand of “physiological footwear.” It immediately ordered the shutdown of its new head office in the city and the dismissal of all its 50-odd employees, including some top managers.

The company's administrators are now looking for potential investors that may be willing to buy MBT's intellectual property rights, its inventories and also some of its sales subsidiaries such as the ones in Italy and Spain, which are profitable. They both have their own warehouses, and the Spanish one owns 70 MBT stores in the country. This would indicate that MBT's other operations around the world, including its subsidiaries in Germany, the U.S. and other countries, where the company employs about 350 more people, are facing a more uncertain future.

Faced with serious liquidity problems due to declining sales and big losses incurred in 2011, MBT had been looking intensively for a new investor in the last few months, as it had become impossible for the company to achieve a turnaround under its present financial structure. Berkshire Partners, the Boston-based equity investment firm that acquired an initial 20 percent stake in its holding company in 2007, raised its stake to 100 percent last September, but it was unwilling to put in more equity to refinance it.

The search for new investors was launched by Michel Perraudin, the former Adidas executive who was appointed chairman of MBT last November, taking the place of Hermann Oberschneider, one of the former partners in the company. At the beginning of this year, the board of directors named an experienced management consultant, Thomas Wenzel, who became interim manager after the resignation a few weeks ago of MBT's former chief executive, Jan Stig Andersen.

In agreement with the banks, discussions were held with several interested parties, but in the end none came forward with a takeover offer after calculating the possible risks against the conditions set by the owners and the banks, leaving no other alternative than an immediate bankruptcy filing. This was in spite of the fact that the banks had agreed in principle to take a haircut on outstanding credits of about 100 million Swiss francs (€83.3m-$106.0m), which stemmed essentially from the company's leveraged buyout in 2006 by a group of former ski racers from Austria.

The plan at the time was to take MBT's annual turnover up to some CHF500 million a year. The company did reach a peak of between CHF150 million (€124.9m-$159.1m) and CHF200 million (€166.5m-$212.1m) in 2006 and 2007, but the competition that subsequently developed at the lower end of the toning market prevented the brand from reaching its goals in spite of actions intended to position it at a different level. Sales declined to about CHF120 million (€99.9m-$127.3m) last year and were recently expected to go further down to around CHF100 million (€83.3m-$106.1m) this year. Sales went down very steeply in the U.S., which once accounted for half of MBT's total sales.

The poor sales stood against high costs related to the operation of some new concept stores and of new subsidiaries in countries where MBT previously had distributors. MBT also invested a lot in the expansion of its product range, adding some athletic styles and trying to make its collection look younger, fresher and more fashionable. Last year, it reacted to the low-priced offerings of Skechers and others by introducing a more accessible line of casual shoes, which has been very well accepted lately.

However, while MBT has been asserting that it is much more functional than its imitators, most retailers and consumers have not made the difference. The class action suits launched by consumers against Skechers and Reebok in the U.S. in the past couple of years have raised doubts about the credibility of any claims made with regard to the muscle toning and weight loss benefits of the whole category. The resulting skepticism has led to a real implosion of the toning market, particularly in the U.S. In addition to being left with a lot of inventory to clear, Skechers is now being forced to pay $45 million to settle a class action suit brought against it by disgruntled consumers.

Karl Müller, the Swiss inventor of the “physiological footwear” concept and founder of MBT, made a statement last week expressing his disappointment and indicating that he may consider buying back the brand, although he and his son are developing similar products under two different brands, Kybun, Kyboot and Joya. Müller cashed out of MBT in 2006, selling most of the assets to some of his collaborators, but retained the rights to the brand for South Korea, where the company previously owned its own factory.