Akorn, Inc. and its debtor affiliates filed with the U.S. Bankruptcy Court for the District of Delaware a Disclosure Statement for Joint Chapter 11 Plan dated June 30, 2020.
Following the terminated merger and related shareholder litigation, a group of Term Loan Lenders (the “Ad Hoc Group”) organized and asserted certain purported defaults under the Debtors’ Term Loan Credit Agreement. After significant arm’s-length negotiations with the Ad Hoc Group, the Debtors ultimately entered into the Standstill Agreement with certain of the Term Loan Lenders, pursuant to which the Term Loan Lenders party thereto agreed, among other things, not to declare an event of default under the Term Loan Credit Agreement for the duration of an agreed-upon standstill period. The standstill period expired prior to commencement of the Chapter 11 Cases.
After pivoting to the new timeline, the Debtors, their advisors, and the Ad Hoc Group and its advisors worked tirelessly to negotiate the definitive documentation for a value-maximizing credit bid from the Term Loan Lenders that enticed further bidding as markets began to stabilize in the wake of the COVID-19 crisis. The stalking horse bid set the floor for a further market test and a potential sale to a third-party Purchaser, only if such Purchaser submits an actionable bid that is higher or otherwise better than the stalking horse bid. The Term Lenders’ support for the sale process is also memorialized in the Restructuring Support Agreement executed by holders of approximately 80% in principal amount of the term loans. To execute the value-maximizing restructuring contemplated by the Restructuring Support Agreement, certain of the Restructuring Support Agreement parties also have agreed to provide $30 million of debtor-in-possession (“DIP”) financing to fund the chapter 11 cases and sale process.
The Plan is supported by the Debtors and certain parties in interest that have executed the Restructuring Support Agreement, including Holders of approximately 80 percent in principal amount of Term Loan Claims.
As for Class 4 General Unsecured Claims, each Holder of an Allowed General Unsecured Claim that is not assumed by the Purchaser shall receive its Pro Rata share of the Distributable Proceeds, if any, pursuant to the Waterfall Recovery. At this time, it is expected that Class 4′s share of the Distributable Proceeds will be $0.
For the avoidance of doubt, all General Unsecured Claims that are assumed by the Purchaser pursuant to the Sale Transaction Documentation shall be satisfied by the Purchaser in full in cash following the Effective Date in the ordinary course of business; provided that any Allowed General Unsecured Claim that has been expressly assumed by the Purchaser under the Sale Transaction shall not be an obligation of the Debtors as of or after the Effective Date.
Holders of Class 8 Akorn Interests will receive its Pro Rata share of the Distributable Proceeds, if any, pursuant to the Waterfall Recovery. At this time, it is expected that Class 8′s share of the Distributable Proceeds will be $0.
The following sources shall be used to fund the distributions to Holders of Allowed Claims against the Debtors in accordance with the treatment of such Claims and subject to the terms provided in the Plan: Cash on hand, borrowings under the DIP Facility, the Distributable Proceeds, if any, the Wind-Down Amount, the Debtors’ rights under the Sale Transaction Documentation, payments made directly by the Purchaser on account of any Assumed Liabilities under the Sale Transaction Documentation, payments of Cure Costs made by the Purchaser, the return of any utility deposits as set forth in the Utilities Orders, and all Causes of Action not previously settled, released, or exculpated under the Plan, if any, shall be used to fund the distributions to Holders of Allowed Claims against the Debtors in accordance with the treatment of such Claims and subject to the terms provided in the Plan. Unless otherwise agreed in writing by the Debtors and the Purchaser, distributions required by the Plan on account of Allowed Claims that are Assumed Liabilities shall be the sole responsibility of the Purchaser to the extent such Claim is Allowed against the Debtors. The Debtors do not anticipate any distribution to Class 4, Class 7, or Class 8 at this time.
If the Stalking Horse Bid is the Successful Bid, the Wind-Down Amount (i.e., $35.015 million) represents the only anticipated Cash proceeds of the Sale Transaction. As set forth on the Wind-Down budget, the Debtors anticipate that, after giving effect to the Wind-Down, none of the Wind-Down Amount will be available for distribution to Holders of Class 4 General Unsecured Claims, Class 7 Section 510(b) Claims, and Class 8 Akorn Interests. To the extent there is a Cash overbid of the Stalking Horse Bid that is selected as the Successful Bid, there may be incremental Cash that is available for distribution to Holders of Class 4 General Unsecured Claims, Class 7 Section 510(b) Claims, and Class 8 Akorn Interests in accordance with their legal priorities.
A full-text copy of the Disclosure Statement dated June 30, 2020, is available at https://tinyurl.com/yb6joh7c from PacerMonitor at no charge.
Co-Counsel for the Debtors:
Patrick J. Nash, Jr., P.C.
Gregory F. Pesce
Christopher M. Hayes
KIRKLAND & ELLIS LLP
KIRKLAND & ELLIS INTERNATIONAL LLP
300 North LaSalle Street
Chicago, Illinois 60654
Telephone: (312) 862-2000
Facsimile: (312) 862-2200
E-mail: patrick.nash @kirkland.com
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Nicole L. Greenblatt, P.C.
KIRKLAND & ELLIS LLP KIRKLAND
ELLIS INTERNATIONAL LLP
601 Lexington Avenue
New York, New York 10022
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
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Paul N. Heath
Amanda R. Steele
Zachary I. Shapiro
Brett M. Haywood
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 N. King Street
Wilmington, Delaware 19801
Telephone: (302) 651-7700
Facsimile: (302) 651-7701
About Akorn, Inc.
Akorn, Inc. (Nasdaq: AKRX) is a specialty pharmaceutical company that develops, manufactures, and markets generic and branded prescription pharmaceuticals, branded as well as private-label over-the-counter consumer health products, and animal health pharmaceuticals. Akorn is headquartered in Lake Forest, Illinois, and maintains a global manufacturing presence, with pharmaceutical manufacturing facilities located in Illinois, New Jersey, New York, Switzerland, and India.
Akorn, Inc., and its affiliates sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 20-11178) on May 20, 2020.
As of March 31, 2020, the Debtors disclosed total assets of $1,032,275,000 and total liabilities of $1,051,769,000.
The cases are assigned to Judge John T. Dorsey.
The Debtors tapped Kirkland & Ellis LLP and Kirkland & Ellis International LLP as their general bankruptcy counsel. Richards, Layton & Finger, P.A., is the Debtors’ local counsel. AlixPartners, LLP, serves as the Debtors’ restructuring advisor, and PJT Partners LP is the financial advisor and investment banker. Kurtzman Carson Consultants, LLC, is the notice and claims agent.