|
|
Item 1.03
|
Bankruptcy or Receivership.
|
Chapter 11 Petitions
On May 20, 2020 (the “Petition Date”),
Akorn, Inc. (the “Company”) and its U.S. direct and indirect subsidiaries (together with the Company, the “Company
Parties”) filed voluntary cases under chapter 11 (the “Chapter 11 Cases”)
of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the
District of Delaware (the “Court”). The Company Parties have filed a motion to have the Chapter 11 Cases jointly administered
under the caption In re Akorn, Inc., et al. Each Company Party will continue to operate its business as a “debtor
in possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code
and the orders of the Court.
On the Petition Date, the Company Parties
filed a number of motions with the Court generally designed to facilitate the Company Parties’ transition into Chapter 11.
Certain of these motions seek authority from the Court for the Company Parties to make payments upon, or otherwise honor, certain
obligations that arose prior to the Petition Date, including obligations related to employee wages, salaries and benefits, taxes,
and certain vendors and other providers of goods and services essential to the Company Parties’ businesses. The Company Parties
expect that the Court will approve the relief sought in these motions on an interim basis.
The Company Parties are seeking to sell
some or all of their assets pursuant to Section 363 of the Bankruptcy Code (the “Sale”). To facilitate their continued
marketing and sale process, the Company Parties have filed a motion with the Court to approve the Bidding Procedures (as defined
below), including milestones by which parties in interest will be required to submit indications of interest and bids for all or
a portion of the Company Parties’ assets.
Restructuring Support Agreement
In contemplation of the Chapter 11 Cases,
on May 20, 2020, the Company Parties entered into a Restructuring Support Agreement (together
with all exhibits and schedules thereto, the “Restructuring Support Agreement”) with certain lenders (the
“Consenting Term Lenders”) holding more than 75% in principal amount of the outstanding term loans under the Term Loan
Credit Agreement, dated as of April 17, 2014 (as amended, restated, supplemented or otherwise modified, the “Term Loan Credit
Agreement”), by and among the Company and certain of its subsidiaries, the lenders thereunder (the “Lenders”)
and Wilmington Savings Fund Society, FSB, in its capacity as successor administrative agent (the “Term Loan Agent”).
The Restructuring Support Agreement provides
that the Consenting Term Lenders will support certain transactions (the “Transactions”) in pursuit of the Sale and
confirmation of a Chapter 11 Plan contemplated by the plan term sheet attached to and incorporated into the Restructuring
Support Agreement (the “Plan”) on the terms set forth in the Restructuring Support Agreement.
The Restructuring Support Agreement contemplates,
among other things:
|
|
·
|
that the Sale will be conducted pursuant to the bidding procedures attached to and incorporated into the Restructuring
Support Agreement (as amended, modified, waived or supplemented, the “Bidding Procedures”);
|
|
|
·
|
that the Sale will be conducted as follows:
|
|
|
o
|
in the event that the Buyer (as defined below) is the Successful Bidder (as defined in the Bidding Procedures), on the terms
set forth in the Stalking Horse APA (as defined below), pursuant to which the full amount of indebtedness under the Term Loan Credit
Agreement shall be credit bid, or
|
|
|
o
|
in the event that a Qualified Bidder (as defined in the Bidding Procedures) other than the Stalking Horse Bidder is the Successful
Bidder, on the terms of the purchase agreement for the Successful Bidder as approved by the Court; and
|
|
|
·
|
commitments by the Consenting Term Lenders to provide the debtor in possession financing pursuant to the terms and conditions
set forth in the DIP Credit Agreement (described below).
|
In accordance with the Restructuring Support
Agreement, the Consenting Term Lenders agreed, among other things, to: (i) vote in favor of the Plan , including supporting
all of the debtor and third-party releases, injunctions, discharge and exculpation provisions provided in the Plan; (ii) use commercially
reasonable effort to support the Transactions and take all reasonable actions necessary to implement and consummate the Transactions
in accordance with the terms, conditions, and applicable deadlines set forth in the Restructuring Support Agreement, the Plan and
the Bidding Procedures, as applicable; (iii) direct the Term Loan Agent (or any designated subagent) to credit bid up to the
full amount of indebtedness under the Term Loan Credit Agreement and otherwise facilitate the Transactions contemplated by the
Restructuring Support Agreement and the Stalking Horse APA; and (iv) negotiate in good faith the applicable Definitive Documents
(as defined in the Restructuring Support Agreement) and use their commercially reasonable efforts to agree to the form and substance
of such Definitive Documents consistent with the terms of the Restructuring Support Agreement.
In accordance with the Restructuring
Support Agreement, the Company Parties agreed, among other things, to: (i) use commercially reasonable efforts to (a)
pursue the Transactions on the terms and in accordance with the milestones set forth in the Restructuring Support Agreement,
and (b) cooperate with the Consenting Term Lenders to obtain necessary Court approval of the Definitive Documents to
consummate the Transactions; (ii) not take any action, and not encourage any other person or entity to, take any action,
directly or indirectly, that would reasonably be expected to, breach or be inconsistent with this Agreement, or take any
other action, directly or indirectly, that would reasonably be expected to interfere with the acceptance or implementation of
the Transactions, this Agreement, the Sale, or the Plan; (iii) use commercially reasonable efforts to obtain any
and all required regulatory and/or third-party approvals for the Transactions; (iv) negotiate in good faith and use
commercially reasonable efforts to execute and deliver the Definitive Documents and any other required agreements to
effectuate and consummate the Transactions as contemplated by this Agreement; and (v) use commercially reasonable efforts to
seek additional support for the Transactions from their other material stakeholders to the extent reasonably prudent.
The
Restructuring Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet specified
milestones related to the filing, approval, confirmation and effectiveness of the Plan, entry of orders relating to the DIP Facility
and the closing of the Sale.
The foregoing description is only a summary
of the Restructuring Support Agreement, and is qualified in its entirety by reference to the full text of the Restructuring Support
Agreement, which is filed as Exhibit 10.1 hereto and incorporated by reference herein.
Stalking Horse APA
The Company and certain of its direct
and indirect subsidiaries (collectively, the “Sellers”) have agreed on the form of an asset purchase agreement
with certain of the Company’s existing lenders (collectively, the “Buyer”) substantially in the form
attached to and incorporated into the Restructuring Support Agreement (the “Stalking Horse APA”), pursuant to
which the Buyer will agree to purchase, subject to the terms and conditions contained therein, substantially all of the
assets of the Sellers. Each of the Sellers is a debtor in the Chapter 11 Cases.
The Sale pursuant to the Stalking Horse APA will be subject to approval of the Court and an auction to solicit higher or otherwise
better bids. The Sellers will seek Court approval to declare the Buyer as the “stalking horse” bidder within thirty
days of the Petition Date. If the Company Parties receive any bids that are higher or otherwise better, the Company Parties expect
to conduct an auction no later than eighty-two days after the Petition Date. As the stalking horse bidder, the Buyer’s offer
to purchase substantially all of the assets of the Sellers, to be forth in the Stalking Horse APA, will serve as the minimum or
floor bid on which the Company Parties, their creditors, suppliers, vendors, and other bidders may rely. Other interested bidders
would be permitted to participate in the auction they submit qualifying offers that are higher or otherwise better than the stalking
horse bid.
Under the terms of the Stalking Horse APA,
the Buyer will agree, absent any higher or otherwise better bid, to acquire substantially all of the assets of the Sellers for
aggregate consideration comprising (i) the assumption of certain liabilities, (ii) the credit bid of 100% of the Lenders’
pre-petition claims under the Term Loan Credit Agreement, which amount shall be satisfied by discharging all of the Lenders’
pre-petition claims pursuant to section 363(k) of the Bankruptcy Code, and (iii) an amount in cash equal to the amount set forth
in the Wind-Down Budget included as an exhibit to the Stalking Horse APA.
The foregoing description of the Stalking
Horse APA does not purport to be complete and is qualified in its entirety by reference to the final, executed Stalking Horse APA,
as approved by the Court.
Debtor-In-Possession Financing
The
Company Parties have agreed on the form of a debtor-in-possession credit agreement with the Consenting Term Lenders to be
party thereto and Wilmington Savings Fund Society, FSB, as the administrative agent, setting forth the terms and conditions
of a $30 million debtor in possession financing facility (the “DIP Facility”), substantially in the form
attached to and incorporated into the Restructuring Support Agreement (the “DIP Credit Agreement”). Upon approval
by the Court and the satisfaction of the conditions set forth in the DIP Credit Agreement, the DIP Facility will provide the
Company Parties with valuable liquidity, which, along with cash on hand, and cash generated from ongoing operations, will be
used to support the business and the marketing and Sale process.
The
foregoing description of the DIP Facility and the DIP Credit Agreement does not purport to be complete and is qualified in its
entirety by reference to the final, executed DIP Credit Agreement, as approved by the Court.