Endo’s proposed sale process draws objection from noteholders

By Sarah Lizee

Olympia, Wash., Jan. 6 – Endo International plc’s proposed bid procedures drew an objection Friday from an informal group of unsecured noteholders, according to documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

As background, the company has lined up a stalking horse deal with a group of first-lien lenders, which seek to credit bid the full amount of the $5.9 billion of prepetition first-lien debt.

The first-lien lenders have also agreed to establish voluntary trusts funded with up to $550 million over time, which will be disbursed to eligible opioid claimants who elect to participate in such trusts. They will also provide at least $122 million in cash to wind down the debtors’ operations following the sale, and fund pre-closing professional fees.

In its objection, the informal committee noted that the debtors’ motion was “stunningly frank” regarding why they have chosen the 363 sale: they wish to avoid a contested plan confirmation hearing at which “out-of-the-money creditors [would] challenge the debtors’ valuation in an effort to generate a recovery.”

“Courts only approve a sale of substantially all of the debtor’s assets outside of a plan where – unlike here – they are faced with a so-called ‘melting ice cube,’ and the only other alternative is immediate liquidation,” the committee said.

The group noted that the debtors had about $1.032 billion of cash on hand and roughly $640 million of revolver availability just before the bankruptcy. They also consistently outperformed projections, have a capital structure that largely does not mature until 2027 and are expected to continue to generate substantial unlevered free cash flow throughout their bankruptcy cases and beyond.

The committee said the debtors are seeking to short-circuit the Chapter 11 review process by establishing the voluntary trusts for the benefit of opioid claimants while other, structurally senior unsecured creditors will receive nothing, because the sale includes a transfer of substantial unencumbered collateral and avoidance actions and other claims that could be pursued to general unsecured creditor recoveries.

“The court should reject the debtors’ attempt to use a section 363 sale to pre-determine the treatment of their stakeholders; nor should it allow them to unfairly discriminate against a subset of unsecured creditors in violation of the cramdown requirements under section 1129(b) of the bankruptcy code,” the committee said.

Other sale terms

Under the stalking horse deal, the first-lien lenders have also agreed to offer employment to all of the debtors’ employees on their current terms and assume and cure a significant number of trade contracts.

There is a four-month formal marketing period where Endo will allow them to attract a higher or otherwise better bid.

Bid protections for the stalking horse include expense reimbursements, but no breakup fee.

The indication of interest deadline is Feb. 21.

Qualified bids are due by April 18. An auction will be held on April 27.

The suggested sale hearing date would be May 3.

Endo is a Dublin, Ireland-based specialty pharmaceutical company. The company filed bankruptcy on Aug. 16 under Chapter 11 case number 22-22549.

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