March 2, 2022 – The Court hearing the Teligent cases has extended the periods during which the Debtors have an exclusive right to file a Chapter 11 Plan, and solicit acceptances thereof, through and including May 12, 2022 and July 11, 2022, respectively [Docket No. 535]. Absent the requested relief, the Plan filing and solicitation periods were scheduled to expire on February 11, 2022 and April 12, 2022, respectively.
Since the Debtors' February 10th filing of a motion requesting the now approved exclusivity extensions [Docket No. 474], the trajectory of these post-sale cases has changed considerably, with the Court's current extension order now largely moot, at least as to any prospect of the Debtors (or antone else) ever filing a Plan or soliciting creditor approval.
On February 23rd, the Debtors, citing their inability to use cash collateral, filed a motion to convert their cases to Chapter 7. The simple fact is that their asset sale efforts, however "successful" they may have been, did not generate proceed sufficient to make secured creditors whole* and without the now withheld authority to access cash collateral the debtors concede that "there is no reasonable chance that they will be able to confirm and complete a Chapter 11 Plan."
*As of the Petition date, the Debtors owed approximately $16.4mn to "Prepetition First Lien Parties" and approximately $89.8mn to "Prepetition Second Lien
Parties" with the Debtors' trio of asset sales (see further below) having generated an estimated $87.2mn of proceeds.
A hearing on the Debtors' conversion motion is schedule for March 9th.
The Debtors' February 23rd conversion motion [Docket No. 519], provides: "Although there are outstanding accounts receivable and other miscellaneous assets that may be available to satisfy certain creditor claims, the Debtors have no ability to pursue the recovery of those assets or to prosecute a Chapter 11 Plan without access to Cash Collateral to fund ongoing administrative expenses through the Chapter 11 Plan process. As a result, the Debtors think there is no reasonable chance that they will be able to confirm and complete a Chapter 11 Plan, and respectfully propose that a Chapter 7 Trustee will be able to bring these Chapter 11 cases to a close more swiftly and effectively. The appointment of a Chapter 7 trustee, in the Debtors' opinion, is preferable to continuing to spend the estates' meagre assets on litigation."
The motion continues, “It is without question that the Debtors ran an extraordinarily successful sale process. The sale process resulted in three (3) separate sale transactions and nearly $88 million in cash proceeds ($23 million more than the stalking horse bids). Unfortunately, and despite the Debtors’ best efforts to negotiate a consensual exit from the chapter 11 cases through a chapter 11 plan of liquidation, discussions between the Debtors, the Committee, and the Debtors’ prepetition secured lenders have reached an impasse and mounting expenses continue to erode value for the Debtors’ stakeholders. As a result, and without the consensual use of cash collateral to fund a chapter 11 plan process, the Debtors have no choice other than to request conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code.
The Debtors made every effort to negotiate in good faith concerning the wind-down of the Debtors’ estates and a consensual exit from chapter 11 given the Debtors’ capital structure and the economic realities of the Chapter 11 Cases. While the Debtors’ decision is regrettable, they nonetheless believe that conversion of the Chapter 11 Cases to chapter 7 is the only path forward in light of the impasse and without use of cash collateral to fund a chapter 11 plan confirmation process.”
Exclusivity Extension Motion
The [now substantively dated] extension motion explains, “The Debtors have been in chapter 11 for less than four (4) months. During this short period of time, the Debtors and their advisors have devoted a significant amount of time and effort to ensuring a smooth transition into chapter 11, and to preserving and maximizing the value of the Debtors’ estates for the benefit of all stakeholders.”
The motion continues, “The Chapter 11 Cases are large and complex. First, the Debtors are a public company conducting business in the U.S. and Canada and in a highly competitive and highly regulated industry. Thus, the Debtors, their employees, and their advisors have been tasked with addressing a number of complex legal and operational issues in addition to the day-to-day demands of operating in chapter 11. Moreover, the Sale Process, which was a great success, involved the concurrent marketing of multiple discrete asset categories. At the conclusion of the process, the Debtors and their advisors negotiated three distinct purchase agreements and related documentation with three separate buyers, obtained entry of the Sale Orders and closed the sales. Accomplishing these tasks and addressing the concerns of the Debtors’ creditors and stakeholders along the way, among other things, has required the full attention of the Debtors’ employees and advisors. Further, the Debtors have been required to devote a significant amount of time, energy and resources to their transition into Chapter 11 more generally and addressing the myriad issues attendant thereto.”
On January 19th, the Court hearing the Teligent cases issued a trio of sale orders which approve: (i) the $27.0mn sale of the Debtors' "Facility Assets" to Leiters, Inc., (ii) the $45.75mn sale of the Debtors' "Canadian Assets" to Hikma Canada Limited and (iii) the $14.42mn sale of the Debtors "U.S. Marketing Authorizations" to PAI Holdings, LLC [Docket Nos 393, 394, and 395, respectively, with each order attaches the relevant asset purchase agreement].
On January 14th, further a December 15th bidding procedures order [Docket No. 290] and an auction occurring on January 13th and 14th, the Debtors notified the Court as to the designation of successful bidders for each of their three major asset groupings, ie their New Jersey manufacturing facility, their Canadian assets and a portfolio of FDA new drug applications (or "ANDAs") [Docket Nos. 373, 374 and 375, respectively].
The Debtors designated:
- Stalking horse Leiters, Inc. as the successful bidder (purchase price $27.0mn, cash element and APA at Docket No. 383) in respect of the pharmaceutical manufacturing and laboratory facility located in Buena, New Jersey, and certain specific service and maintenance agreements and other related assets (the “Facility Assets”) [NB, there were no further qualified bids and hence no back-up bidder],
- Hikma Canada Limited as the successful bidder (purchase price $45.75mn, cash element and APA at Docket No. 384) in respect of the assets located in Canada (the “Canadian Assets”), with SteriMax Inc as the backup bidder and
- Stalking horse PAI Holdings, LLC as the successful bidder (purchase price $14.42mn and APA at Docket No. 385) in respect of the new drug applications and abbreviated new drug applications for generic drug products that the Debtors have submitted for approval to the Food & Drug Administration (the “U.S. Marketing Authorizations”), with Nivagen Pharmaceuticals, Inc. as the backup bidder.
The Hikma Canada bid in respect of the Canadian Assets advanced on the $30.0mn stalking horse bid of ultimate back-up bidder SteriMax Inc and the winning PAI Holdings bid in respect of the U.S. Marketing Authorizations advanced on PAI's $7.0mn opening stalking horse bid.
About the Debtors
According to the Debtors: “Teligent is a specialty generic pharmaceutical company. Our mission is to be a leading player in the specialty generic prescription drug market."
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