SiO2 Medical gets OK of disclosure statement; plan hearing July 18

By Sarah Lizee

Olympia, Wash., June 12 – SiO2 Medical Products, Inc. received approval of the disclosure statement for its Chapter 11 plan on Friday, according to an order filed with the U.S. Bankruptcy Court for the District of Delaware.

The plan confirmation hearing is scheduled for July 18.

As previously reported, the company recently resolved an objection to the disclosure statement from the official committee of unsecured creditors through a settlement.

The company amended the plan and disclosure statement last week to include the settlement terms.

Implementation of the settlement term sheet provides a floor recovery for holders of general unsecured claims of $1.25 million in cash plus potential upside from excess sale proceeds and funds the liquidation trust for a potential recovery from liquidation trust claims.

The plan is supported by initial plan sponsor Oaktree Capital Management, LP, which holds all of the company’s first-lien debt and debtor-in-possession debt, equity holder Athos KG and the committee.

The restructuring has three main components.

First, Oaktree agreed to provide a $120 million super-priority debtor-in-possession facility, $60 million of which is new money and $60 million is a rollup of prepetition term loans.

Second, Oaktree has committed to serve as the initial plan sponsor and equitize its allowed DIP claims and allowed first-lien term loan claims into 100% ownership of reorganized SiO2 through the plan, subject to the company meeting certain milestones and Oaktree’s ability to move away from the plan and purchase the assets of the debtors if a toggle trigger occurs.

Third, Oaktree agreed to subject its recovery under the plan to an auction process under court-approved bid procedures. Oaktree has agreed that it will not participate in the auction process.

Oaktree has indicated that it may consent to a recovery different than what is contemplated under the plan, and the debtors are encouraging all interested parties to engage in the process, even if they may have a lower preliminary bid.

The final bid deadline was set for June 12.

Under the plan, other secured claims and other priority claims are unimpaired.

Holders of first-lien term loan claims will receive, if Oaktree is the plan sponsor, their pro rata share of new common stock or exit financing. If Oaktree isn’t the sponsor, holders will receive payment in full in cash, subject to the excess cash proceeds waterfall, if any, provided that, following the distribution of excess sale proceeds, all first-lien term loan deficiency claims will be waived. This is expected to lead to a recovery of 71.2% to 100%.

Through the settlement, holders of second-lien term loan claims agreed that their claims will recover as Athos subordinated claims.

Holders of general unsecured claims will receive their pro rata share of the cash pool, consideration made available through the excess sale proceeds waterfall, if any, and distributions on account of the liquidation trust interests.

Holders of Athos subordinated claims will receive their pro rata share of consideration available under the excess sale proceeds waterfall, if any, and distributions on account of liquidation trust interests, after senior classes have been paid in full or otherwise satisfied.

Holders of intercompany claims, intercompany interests, section 510(b) claims and interests in SiO2 will receive no recovery.

The parties to the settlement are hoping the plan will go effective by the end of July.

The Auburn, Ala.-based company creates and manufactures engineered primary packaging container components for the pharmaceutical and biotechnology industry. The company filed bankruptcy on March 29 under Chapter 11 case number 23-10366.

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