Leiner Health files for Chapter 11, noteholders to receive cash, preferreds

New York, Feb. 28 - Leiner Health Products Inc. made a prepackaged Chapter 11 filing after obtaining "overwhelming" support from its bank lenders and noteholders. Noteholders will receive a combination of cash and preferred stock under the proposed reorganization plan.

The Carson, Calif. nutritional supplement company said the prepackaged plan was backed by 100% of the bank lenders and 98% of noteholders in a pre-filing solicitation.

Court approval of the plan and emergence from bankruptcy is expected in 45 to 60 days, Leiner said.

"We expect to emerge from this process strengthened with a more appropriate capital structure and reengineered business well positioned to build on our industry leading track record of quality and service," said Robert Kaminski, chief executive officer of Leiner, in a news release.

As previously announced, Leiner's primary investors - a group led by North Castle Partners - will make an additional equity investment of $20 million.

Under the proposed reorganization plan, holders of Leiner's 9.625% senior subordinated notes due June 30, 2007 will receive $15 million in cash and newly created preferred stock in exchange for their notes. Leiner said the exchange will reduce its debt by $85 million.

The company's existing senior debt will remain outstanding but will be restructured. In addition, the banks will give the company an additional $20 million revolving credit facility.

Leiner's Canadian business, Vita Health, is not filing for bankruptcy.

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