K-V Pharmaceutical creditors preparing equity financing commitment

By Caroline Salls

Pittsburgh, April 12 - K-V Pharmaceutical Co.'s official committee of unsecured creditors said an investor group comprised largely of incumbent creditors is prepared to commit to provide equity financing to fund an alternative plan of reorganization for K-V's Chapter 11 case, according to an April 12 filing with the U.S. Bankruptcy Court for the Southern District of New York.

The committee said the alternative plan would pay senior secured noteholders in full "and drive significantly higher recoveries to trade creditors and convertible noteholders."

The creditor group said the investors are in the process of preparing definitive documentation for delivery to K-V in the coming days.

As previously reported, the company's current plan would give senior noteholders a share of 82% of the common equity of the reorganized K-V Pharmaceutical, subject to dilution by new common stock issued in connection with a management incentive plan and rights offering, and a $50 million second-lien term loan facility.

Convertible noteholders would receive a share of 3% of the new common stock, subject to dilution, and the rights to purchase up to $20 million of new common stock under the current plan at an exercise price intended to provide the senior noteholders with a recovery equal to par plus accrued interest on their senior secured notes.

Also under K-V's current plan, holders of general unsecured claims would receive a share of cash equal to the lesser of $1.49 million and 9.05% of the claim amount.

"Among other infirmities, the debtors' [current] plan has not been proposed in good faith, substantially under-values the debtors' assets, unfairly discriminates in its treatment of general unsecured creditors and fails to provide value to general unsecured creditors that they are otherwise entitled to receive," the committee said in the filing.

The creditor group also said K-V's disclosure statement does not give enough information on total enterprise valuation, management's projections and assumptions, the company's performance during the Chapter 11 cases, the value of Makena and non-Makena assets or other information that is needed to determine whether creditors should vote to accept or reject the plan.

The disclosure statement hearing is scheduled for April 23.

K-V Pharmaceutical, a St. Louis-based specialty pharmaceutical company, filed for bankruptcy on Aug. 4, 2012. Its Chapter 11 case number is 12-13346.

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