December 31, 2018 – The Debtors filed a Prepackaged Chapter 11 Plan of Reorganization and related Disclosure Statement [Docket Nos. 4 and 5] and requested a combined hearing for approval of the Plan and Disclosure Statement for February 18, 2109 [Docket No. 6].
The Disclosure Statement notes, “The primary objectives of the Plan are to (i) deleverage the Debtor’s balance sheet, (ii) settle, compromise, or otherwise dispose of certain Claims on terms that the Debtor believes to be fair and reasonable and in the best interests of its creditors and interest holders, (iii) consummate the transaction contemplated by the New Series A Preferred Stock Purchase Documents, and (iv) bring its lifesaving device to market.”
The Plan proposes the following key steps in respect of the Debtors’ balance sheet restructuring:
- All existing equity will be cancelled,
- The 2012 and 2014 Notes will be converted into 100% of the new common stock of the Reorganized Debtor, subject to dilution by a management stock option plan, representing 28% of the equity in the Reorganized Debtor on a fully diluted basis (assuming $10,000,000 minimum participation in the Rights Offering),
- The 2016 Notes will be converted into Series A Preferred Stock, representing 12.5% of the equity in the Reorganized Debtor on a fully diluted basis (assuming $10,000,000 minimum participation in the Rights Offering),
- General Unsecured Creditors will share pro rata in a pool of $500,000,
- $2,000,000 of DIP Facility Claims will be converted into Series A Preferred Stock at a 22% discount to the Series A Offering purchase price with any DIP Facility Claims in excess of such amount paid back in cash with interest on the Effective Date, and
- $10,000,000 to $15,000,000 of new capital will be raised through the Series A Offering.
The following is a summary of classes, claims, voting rights and expected recoveries:
- Class 1 (“Non-Tax Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Estimated recovery is 100%.
- Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Estimated recovery is 100%.
- Class 3 (“2012 Notes Claims”) is impaired and entitled to vote on the Plan. Estimated recovery is 12%.
- Class 4 (“2014 Notes Claims”) is impaired and entitled to vote on the Plan. Estimated recovery is 12%.
- Class 5 (“2016 Notes Claims”) is impaired and entitled to vote on the Plan. Estimated recovery is 100%.
- Class 6 (“General Unsecured Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Estimated Recovery is up to 100%, subject to dilution for unknown unliquidated, disputed, and contingent claims.
- Class 7 (“Convenience Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Estimated recovery is 100%.
- Class 8 (“Old Equity Interests”) is impaired, deemed to reject and not entitled to vote the Plan. Estimated recovery is 0%.
The following appendices were attached to the Disclosure Statement:
- Appendix A: Prepackaged Plan of Reorganization of Angel Medical Systems, Inc.
- Appendix B: Liquidation Analysis
- Appendix C: Use of Funds and Financial Projections
- Appendix D: Independent Accountant’s Compilation Report (Fiscal years ending, December 2016 and December 2017)
- Appendix E: Unaudited Financial Statement Q3 2018
- Appendix F: Rights Offering-Indication of Interest and Summary Terms
The following exhibits were filed with the Plan:
- Exhibit A: Terms New Series A Preferred Stock Purchase Documents
The following exhibits were listed but not yet filed:
- Exhibit B: List of Assumed Contracts
- Exhibit C: List of Rejected Contracts
- Exhibit D: Amended and Restated Articles of Incorporation
- Exhibit E: New Series A Preferred Stock Purchase Agreement
- Exhibit F: New Investors’ Rights Agreement
- Exhibit G: New Voting Agreement
- Exhibit H: New Right of First Refusal and Co-Sale Agreement
- Exhibit I: Identification of Directors of Reorganized Debtor
Proposed Key Dates:
- Voting Deadline: January 14, 2019
- Objection Deadline: February 5, 2019
- Hearing to approve Disclosure Statement and confirm Plan: February 18, 2019
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