Lannett eyes possible debt restructuring, defers convertibles coupon

By Marisa Wong

Los Angeles, April 6 – Lannett Co., Inc. (CCC-) is in discussions with key secured creditors regarding a potential recapitalization or restructuring of its capital structure, according to a press release.

The company said it is looking into a recapitalization or restructuring as a result of continued competitive pressures on its current portfolio and is evaluating options to establish a sustainable capital structure ahead of the launch of new products, including its biosimilar insulin glargine product.

The company said that it cannot give any assurance as to if or when it will consummate any such transactions but that it expects to be able to reach an agreement with its key secured creditors in the near term.

Any such potential transaction may involve the restructuring of all or a material portion of the company’s outstanding debt, including the exchange of all or a material portion of its secured debt for new common stock or other equity.

Holders of the company’s common stock and convertible notes may not receive any value or payments in a recapitalization, restructuring or similar transaction to may experience material dilution or the loss or cancellation of their investment, the company noted.

The terms of any transaction will depend on market conditions, the company’s liquidity requirements and cash position, contractual restrictions, trading prices of debt from time to time and other factors.

The company also announced on Wednesday that it has elected to defer an interest payment on some of its unsecured convertible notes and enter a 30-day grace period. The company noted that its election to not make the interest payment was not driven by liquidity constraints, as it has about $47 million of unrestricted cash as of March 31.

If the company does not make this interest payment within the 30-day grace period, it will constitute an event of default under the indenture governing the convertible notes. If an event of default occurs, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding convertible notes may declare 100% of the principal of, and accrued and unpaid interest on, all the convertible notes to be due and payable immediately.

Based in Trevose, Pa., Lannett develops, manufactures, packages, markets and distributes generic pharmaceutical products.

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