Sorrento Therapeutics’ DIP motion draws U.S. trustee objection

By Sarah Lizee

Olympia, Wash., Feb. 23 – Sorrento Therapeutics, Inc.’s emergency motion seeking approval of a $5 million debtor-in-possession note facility with BioVintage, Inc. as lender drew an objection from Region 7 U.S. trustee Kevin M. Epstein, according to documents filed Friday with the U.S. Bankruptcy Court for the Southern District of Texas.

Epstein said the court should not consider the financing motion until the previously filed motions to transfer venue or dismiss the cases are decided or otherwise resolved.

The U.S. trustee said there is no emergency because the debtors have failed to show that using the DIP financing for professional fees over six weeks is necessary to preserve the remaining assets of the estates.

“In fact, the proposed budget demonstrates that but for forecasted payment of unsubstantiated professional fees, the debtors could operate on their existing cash and projected receivables,” Epstein said in the objection.

Epstein added that the proposed budget included with the DIP motion does not appropriately break out the anticipated cost to document and pursue closing of the proposed sale.

Financing terms

As previously reported, the company is seeking an additional order authorizing the sale of its remaining assets to a limited liability company capitalized by a group of investors led by Michael Vasinkevich and other investors, or a shelf company designated by such limited liability company, in either case, overseen from an operations perspective by Dr. Henry Ji, the debtors’ chief executive officer.

Vasinkevich is an investment banker who runs Stockblock Securities LLC and previously ran and sold H.C. Wainwright & Co, where he often helped Sorrento raise capital, the company said.

The proposed DIP lender is fully capitalized by Vasinkevich.

The company hopes to draw $3 million following entry into a DIP order, then draw the remaining $2 million on or after March 1.

Sorrento said emergency relief is required by Saturday because the debtors’ liquidity is extremely limited, with only about $3.6 million of unrestricted cash on hand, which is estimated to be depleted during the next week following payment of wages and other operating expenses.

“Without the DIP facility, the debtors will not have sufficient liquidity to proceed and will most likely have to consider converting these cases to Chapter 7, to the detriment of all stakeholders,” the company said in the motion.

The facility would mature on March 31 and bear interest at 8% per annum, payable in kind.

There are no fees under the proposed DIP facility.

The biopharmaceutical company is based in San Diego. The company filed bankruptcy on Feb. 13, 2023 under Chapter 11 case number 23-90085.

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