New Chapter 11 Bankruptcy Filing - Egalet Corporation

Egalet Corporation

October 30, 2018

Pennsylvania-based publicly-traded specialty pharma company, Egalet Corporation ($EGLT), filed for chapter 11 bankruptcy in the District of Delaware — the latest in a mini-trend of specialty pharma companies to work their way into bankruptcy court (i.e., Orexigen Therapeutics Inc., Bind Therapeutics, Concordia).

The company intends to use the bankruptcy process to effectuate an acquisition of the assets of Iroko Pharmaceuticals Inc., a privately-held specialty pharma company focused on pain management therapies. The company and Iroko will enter into an asset purchase agreement in connection with and as part of a plan of reorganization, and Iroko will obtain 49% of the outstanding stock of the reorganized Egalet and $45mm of new senior secured notes. The acquisition will fortify the reorganized Egalet’s product-candidate lineup which already includes one anti-inflammatory nasal spray and one oral oxycodone formulation. This proposal is also supported by various holders of the company’s debt in the form of a restructuring support agreement.

But why is this company bankrupt in the first place? First, $128.6mm of debt taken on to fund (i) the development of commercial operations relating to the company’s approved products and (ii) R&D costs relating to product candidates. Also:

For the years ended December 31, 2017, 2016 and 2015, the Debtors reported net losses of approximately $69.4 million, $90.6 million and $57.9 million, respectively. These losses were a result of the Debtors’ continued investments in their commercialization capabilities, the Debtors’ research and development activities, the Debtors’ increasing debt service obligations and general difficulties in increasing the revenue generated from the Debtors’ marketed products, including challenges specific to the abuse-deterrent market such as shifting legislative and social responses to the opioid epidemic.

On account of all of this, the company got a Nasdaq delisting which triggered a “fundamental change” under the company’s converts which required the company to buy back its converts. Of course, the company didn’t have the ability to do so under its credit docs. Ruh roh. Enter restructuring professionals here.

The reorganized debtors will continue to operate under the Egalet name and will be positioned, post-acquisition, to market six commercial products. The company intends to use cash collateral to finance the cases and be out of bankruptcy within 95 days.

Among the companies largest shareholders are Highbridge Capital Management LLC, Broadfin Capital LLC, Deerfield Management Company LP, and Franklin Advisors Inc.

  • Jurisdiction: D. of Delaware

  • Capital Structure: $128.6mm debt (see below)

  • Company Professionals:

    • Legal: Dechert LLP (Michael Sage, Brian Greer, Stephen Wolpert, Alaina Heine) & (local) Young Conaway Stargatt & Taylor LLP (Robert Brady, Sean Greecher)

    • Financial Advisor: Berkeley Research Group LLC

    • Investment Banker: Piper Jaffray & Co.

    • Claims Agent: KCC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Ad Hoc Secured Noteholder Committee

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Jacob Adlerstein, Adam Denhoff, Michael Turkel, Miriam Levi) & (local) Cozen O’Connor (Mark Felger, Simon Fraser)

    • Ad hoc committee of holders of the 5.50% Convertible Notes due 2020 and 6.50% Convertible Notes due 2024

      • Legal: Akin Gump Strauss Hauer & Feld LLP (Michael Byun, Erik Preis, Stephen Kuhn, Erica McGrady) & (local) Ashby & Geddes PA (Karen Skomorucha Owens)

    • Iroko Pharmaceuticals LLC

      • Legal: Baker & McKenzie LLP (Debra Dandeneau, Frank Grese III) & (local) Whiteford Taylor & Preston LLC (L. Katherine Good, Aaron Stulman)

Source: First Day Declaration

Source: First Day Declaration

New Chapter 11 Filing - Global A&T Electronics Ltd.

Global A&T Electronics Ltd. 

  • 12/17/17 Recap: Singapore-based provider of semiconductor assembly and test services for integrated circuits for use in analog, mixed-signal and logic, and memory products across the globe filed for prepackaged bankruptcy...finally. The company had skipped its $56mm interest payment and let its 30-day grace period expire; it has also been the subject of litigation after issuing new notes back in 2014 in exchange for junior debt. The company blames the litigation, an over-levered balance sheet, underspending on capex, and liquidity constraints for its need to reorganize. The company seeks to confirm the case in FOUR DAYS which may be a new record for a bankruptcy of this size. 
  • Jurisdiction: S.D. of New York (Judge Drain)
  • Capital Structure: $1.13b 10% '19 first lien notes ($625mm Initial Nots, $502mm Additional Notes)(Citicorp International Limited)
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (Marc Kieselstein, Patrick Nash, Gregory Pesce, Michael Slade)
    • Financial Advisor: Alvarez & Marsal LLC (Robert Caruso)
    • Investment Banker: Moelis & Company LLC
    • Disinterested Director: Eugene Davis
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Ad Hoc Group of Initial Senior Secured Noteholders (GSO Capital Partners LP, IP All Seasons Asian Credit Fund, Brigade Capital Management LP, Southpaw Credit Opportunity Master Fund LP)
      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Abhilash Raval, Brian Kinney, Michael Price)
      • Financial Advisor: PJT Partners LP
    • Ad Hoc Committee of Additional Senior Secured Noteholders (Taconic Capital Advisors LP, Marble Ridge Master Fund LP, KLS Diversified Asset Management)
      • Legal: Dechert LLP (Michael Sage, Brian Greer, Janet Doherty)
    • Ad Hoc Committee of Additional Senior Secured Noteholders
      • Legal: Ropes & Gray LLP (Gregg Galardi, Stephen Moeller-Sally, Daniel Anderson)
    • TPG
      • Legal: Cleary Gottlieb Steen & Hamilton LLP (James Bromley, Benjamin Beller)

New Chapter 11 Bankruptcy & CCAA - Toys "R" Us Inc.

Toys "R" Us Inc.

  • 9/19/17 Recap: So. Much. To. Unpack. Here. We've previously discussed the run-up to this massive chapter 11 bankruptcy filing here and here. Still, suffice it to say that, unlike many of the other retailers that have predictably filed for bankruptcy thus far in 2017, this one was different. This one seemingly came out of nowhere - particularly given the proximity to the holiday shopping season. Before we note what this case is, lets briefly cover what it isn't and clear the noise that is pervasive on the likes of Twitter: this is NOT "RIP" Toys "R" Us. We don't get overly sentimental usually but the papers filed with the bankruptcy court were well-written and touching: this is a store, a brand, that means a lot to a lot of people. And it's not going anywhere (the company will have its challenges to assure people that this is the case). This is a financial restructuring not a liquidation: the company simply hasn't been able to evolve while paying $400mm in annual interest expense on over $5b of private equity infused debt. Plain and simple. Yes, there are other challenges (blah blah blah, Amazon), but with that debt overhang, it appears the company hasn't been able to confront them (PETITION side note: an ill-conceived deal with Amazon 18 years ago is mind-blowing when viewed from the perspective of Amazon's long game). With this filing, the company is signaling that the time for short term band-aids to address its capital structure is over. Now, "[t]he time for change, and reinvestment in operations, has come." Decisive. Management isn't messing around anymore. With a reduction in debt, the company will be unshackled and able to focus on "general upkeep and the condition of...stores, [its] inability to provide expedited shipping options, and [its] lack of a subscription-based delivery service." Indeed, the company intends to use a $3.1b debtor-in-possession credit facility to begin investing in modernization immediately.
  • Interesting Facts:
    • Toy Manufacturers: Mattel ($MAT)(approx $136mm), Hasbro ($HAB) (approx $59mm) & Lego (approx $31.5mm) are among the top general unsecured creditors of the company. Mattel and Hasbro's stock traded down quite a bit yesterday on the rampant news of this filing. Query whether any of the $325mm of requested critical vendor money will apply to these companies.
    • The Power of the Media (read: NOT "fake news"): This CNBC piece helped push the company into bankruptcy. Bankruptcy professionals were retained in July (or earlier in the case of Lazard) to pursue capital structure solutions. In August the company engaged with some of its lenders. But then "...a news story published on September 6, 2017, reporting that the Debtors were considering a chapter 11 filing, started a dangerous game of dominos: within a week of its publication, nearly 40 percent of the Company’s domestic and international product vendors refused to ship product without cash on delivery, cash in advance, or, in some cases, payment of all outstanding obligations. Further, many of the credit insurers and factoring parties that support critical Toys “R” Us vendors withdrew support. Given the Company’s historic average of 60-day trade terms, payment of cash on delivery would require the Debtors to immediately obtain a significant amount—over $1.0 billion—of new liquidity." 
    • Revenue. The company generates 40% of its annual revenue during the holiday season.
    • Footprint. The company has approximately 1,697 stores and 257 licensed stores in 38 countries, plus additional e-commerce sites in various countries. The company has been shedding burdensome above-market leases and combining its Babies and Toys shops under one roof; it intends to continue its review of its real estate portfolio. Read: there WILL be store closures.
    • Eff the Competition. Toys has some choice words for its competition embedded in its bankruptcy papers; it accuses Walmart ($WMT) and Target ($TGT)(the "big box retailers") of slashing prices on toys and using toys as a loss leader to get bodies in doors; it further notes that "retailers such as Amazon are not concerned with making a profit at this juncture, rendering their pricing model impossible to compete with..." ($AMZN). Yikes. 
    • Experiential Retail. The company intends to invest in the "shopping experience" which will include (i) interactive spaces with rooms to use for parties, (ii) live product demonstrations put on by trained employees, and (iii) the freedom for employees to remove product from boxes to let kids play with the latest toys. And...wait for it...AUGMENTED REALITY. Boom. Toysrus.ar and Toysrus.ai here we come. 
  • Jurisdiction: E.D. of Virginia (Judge Phillips)
  • Capital Structure: see below     
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (Jamie Sprayragen, Anup Sathy, Edward Sassower, Chad Husnick, Joshua Sussberg, Robert Britton, Emily Geier) & (local) Kutak Rock LLP (Michael A. Condyles, 
      Peter J. Barrett, Jeremy S. Williams) & (Canadian counsel) Goodmans LLP
    • Legal to the Independent Board of Directors: Munger, Tolles & Olson LLP
    • Financial Advisor: Alvarez & Marsal North America LLC (Jeffrey Stegenga, Jonathan Goulding, Tom Behnke, Cari Turner, Jim Grover, Arjun Lal, Doug Lewandowski, Bobby Hoernschemeyer, Scott Safron, Kara Harmon, Nick Cherry, Adam Fialkowski)
    • Investment Banker: Lazard Freres & Co., LLC (David Kurtz)
    • Real Estate Consultant: A&G Realty Partners LLC (Andrew Graiser)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
    • Communications Consultant: Joele Frank Wilkinson Brimmer Katcher
  • Other Parties in Interest:
  • ABL/FILO DIP Admin Agent: JPMorgan Chase Bank NA
    • Legal: Davis Polk & Wardwell LLP (Marshall Heubner, Brian Resnick, Eli Vonnegut, Veerle Roovers) & (local) Hunton & Williams LLP (Tyler Brown, Henry (Toby) Long III, Justin Paget)
  • DIP Admin Agent (Toys DE Inc). NexBank SSB & Ad Hoc Group of B-4 Lenders (Angelo Gordon & Co LP; Franklin Mutual Advisors LLC, HPS Investment Partners LLC, Marathon Asset Management LP, Redwood Capital Management LLC, Roystone Capital Management LP, and Solus Alternative Asset Management LP)
    • Legal: Wachtell Lipton Rosen & Katz (Joshua Feltman, Emil Kleinhaus, Neil Chatani) & (local) McGuireWoods LLP (Dion Hayes, Sarah Bohm, Douglas Foley)
  • Ad Hoc Group of Taj Noteholders.
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Samuel Lovett, Kellie Cairns) & (local) Whiteford Taylor & Preston LLP (Christopher Jones, Jennifer Wuebker)
  • Steering Committee of B-2 and B-3 Lenders (American Money Management, Columbia Threadneedle Investments, Ellington Management Group LLC, First Trust Advisors L.P., MJX Asset Management LLC, Pacific Coast Bankers Bank, Par-Four Investment Management LLC, Sound Point Capital Management, Taconic Capital Advisors LP).
    • Legal: Arnold & Porter Kaye Scholer LLP (Michael Messersmith, D. Tyler Nurnberg, Sarah Gryll, Rosa Evergreen)
  • 12% ’21 Senior Secured Notes Indenture Trustee: Wilmington Trust, National Association.
    • Legal: Kilpatrick Townsend & Stockton LLP (Todd Meyers, David Posner, Gianfranco Finizio) & (local) ThompsonMcMullan PC (David Ruby, William Prince IV)
  • Bank of America NA
      • Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Shana Elberg, George Howard) & (local) Troutman Sanders LLP (Jonathan Hauser)
    • Private Equity Sponsors: Bain Capital Private Equity LP, Kohlberg Kravis Roberts & Co. L.P. ($KKR), and Vornado Realty Trust ($VNO)
  • Large Creditor: Mattel Inc.
    • Legal: Jones Day (Richard Wynne, Erin Brady, Aaron Gober-Sims) & (local) Michael Wilson PLC (Michael Wilson)
  • Large Creditor: LEGO Systems Inc.
    • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Kelly DiBlasi) & (local) Walcott Rivers Gates (Cullen Speckhart)
  • Large Creditor: American Greetings Corporation.
    • Legal: Baker & Hosteler LLP (Benjamin Irwin, Eric Goodman)
  • Creditor: River Birch Capital
    • Legal: Andrews Kurth & Kenyon LLP (Paul Silverstein)
  • Creditor: Owl Creek Asset Management
    • Legal: Stroock Stroock & Lavan LLP (Samantha Martin)
  • TRU Trust 2016-TOYS, Commercial Mortgage Pass-Through Certificates, Series 2016-TOYS acting through Wells Fargo Bank NA
    • Legal: Dechert LLP (Allan Brilliant, Brian Greer, Stephen Wolpert, Humzah Soofi) & (local) Troutman Sanders LLP (Jonathan Hauser)
  • Trustee: Tru Taj DIP Notes (Wilmington Savings Fund Society FSB)
    • Legal: Porter Hedges LLP (Eric English) & (local) Spotts Fain PC (James Donaldson)
  • Committee of Unsecured Creditors (Mattel Inc., Evenflo Company Inc., Simon Property Group, Euler Hermes North America Insurance Co., Veritiv Operating Company, Huffy Corporation, KIMCO Realty, The Bank of New York Mellon, LEGO Systems Inc.)
First Day Declaration

First Day Declaration

First Day Declaration

First Day Declaration

Updated 10/5/17 11:40 am