K-V filed for Chapter 11 bankruptcy on Aug. 4.
Post-Petition Financing
The drug maker contends it has a deal in place for post-petition financing, also called debtor-in-possession (DIP) financing, with Silver Point Finance LLC.
The money from the DIP agreement would be used to make a $ 60 million payment to Hologic Inc. as per a deal reached between K-V and Hologic on Dec. 10, and it would fund K-V’s general corporate purposes and working capital needs as the bankruptcy proceeds, K-V contends.
Consequently, K-V seeks permission to modify the automatic stay in order to complete the agreement and implement the DIP deal with Silver Point.
Hologic Deal
The DIP funds are needed because K-V entered into an asset purchase agreement with Cytyc Prenatal Products Corp. and Hologic in January 2008 under which Cytyc and Hologic purchased the worldwide rights to the drug Makena (hydroxyprogesterone caproate injection).
Makena is a Food and Drug Administration-approved drug that is K-V’s single most valuable product. It is used to lower the risk of preterm birth in women who are pregnant with one baby and who have delivered one baby too early, or preterm, in the past.
In connection with that sale, K-V continues to make certain payments to Hologic, which are secured by the Makena Assets.
K-V says it intends to use the DIP funds, in part, to fully and finally satisfy all claims of Hologic, which total $ 60 million.
Outstanding Debt
K-V also has outstanding debt that it owes to Deutsche Bank Trust Company Americas related to$ 200 million in 2.5 percent contingent convertible subordinated notes due in 2033, according to K-V. The outstanding balance on those notes is $ 201 million.
Moreover, K-V says it also has outstanding debt it owes to MECW LLC, a nondebtor affiliate of K-V.
MECW entered into a $ 43 million promissory note with LaSalle Bank National Association, which was later assigned to U.S. Bank National Association, as Trustee for the Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities Corp. K-V owes $ 30 million, including principal and interest, on the loan entered into by MECW. 11 U.S. Code Section 363
K-V argues that the Bankruptcy Court should approve the DIP financing because to date the company has financed its bankruptcy through the use of cash collateral alone; however, K-V does not have sufficient cash on hand to fund both continued operations and the payment of the Hologic settlement amount, which is due Dec. 31.
Furthermore, K-V maintains that the DIP agreement meets all the requirements of 11 U.S. Code Section 363(c).
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