Endo committee blasts ‘audacious’ motion for exclusivity extension

By Sarah Lizee

Olympia, Wash., Jan. 13 – Endo International plc’s motion seeking a 180-day extension of its exclusive periods to file and solicit votes on a Chapter 11 plan drew an objection from the official committee of unsecured creditors, according to documents filed Thursday with the U.S. Bankruptcy Court for the Southern District of New York.

The committee called the request “unprecedented and audacious” since the debtors are now seeking to sell their assets, outside of a Chapter 11 plan, to their first-lien lenders through a credit bid for the full amount of the company’s $5.9 billion of prepetition first-lien debt.

The committee said the sale is “deeply concerning” because it orphans non-opioid unsecured creditors, providing them no recovery while “selling” as much as $1 billion or more of unencumbered assets to the first-lien creditors for essentially no consideration.

Among the claims being sold are claims arising from the $95 million in insider bonuses paid in the run-up to bankruptcy – claims that are being released in the sale, disincentivizing the company from pursuing a non-sale path.

“None of this would work in a Chapter 11 plan, where creditors would have the important protections of a vote, the best interests test, equal treatment, and the absolute priority rule, and where the debtors’ insiders would be forced to defend their entitlement to a third-party release,” the committee said.

“It is for this reason, among many others, that the committee objected to the proposed bidding procedures and expects the debtors’ sale, in its current form, will fail as contrary to second circuit law.”

The committee said if the debtors are permitted to pursue the sale path, it is essential that exclusivity be modified now to allow the committee to propose a plan.

A hearing on the exclusivity extension is scheduled for Jan. 19.

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

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