Leiner Health Products files Chapter 11 bankruptcy, secures $74 million DIP facility

By Jennifer Lanning Drey

Portland, Ore., March 10 - Leiner Health Products Inc. filed Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the District of Delaware in order to restructure its debt obligations and explore a possible sale of the business, according to a company news release.

The filing does not include Leiner's Canadian subsidiary.

"After a thorough analysis of Leiner's financial condition, the company concluded that today's court filings by our U.S. operations were both prudent and necessary," Rob Reynolds, Leiner's president and chief executive officer, said in the release.

"Although we have already taken many steps to address the challenges that arose following our March 2007 decision to voluntarily suspend OTC operations by streamlining our operations and manufacturing footprint, these actions were not enough to offset the cost of our substantial debt obligations.

"Filing for Chapter 11 allows Leiner to enhance its liquidity and to initiate a formal process for restructuring our debt and exploring the company's sale in a timely manner," he said.

$74 million DIP

In connection with the filing, Leiner has obtained a commitment for $74 million of debtor-in-possession financing from a group of pre-bankruptcy lenders.

The company believes that the financing, in conjunction with its existing cash flow, will allow Leiner to fulfill obligations associated with operating its business, including making payments to suppliers and other business partners for goods delivered and services provided on or after the Chapter 11 filing.

The DIP facility is subject to court approval.

According to court documents, UBS Securities LLC is the arranger and bookrunner, and UBS AG, Stamford branch, is administrative agent.

Unsecured creditors

Leiner's largest unsecured creditors include:

• U.S. Bank NA, indenture trustee, St. Paul, with a $150 million 11% senior subordinated notes claim;

• BASF Corp., Mount Olive, N.J., with a $5.01 million trade debt claim;

• Dr. Reddy's Laboratories, Bridgewater, N.J., with a $4.76 million trade debt claim;

• Vita Tech International Inc., Tustin, Calif., with a $4.59 million trade debt claim;

• Wells Fargo NB, Minneapolis, with a $3.10 million bond claim;

• Naturegen Inc., San Diego, with a $2.84 million trade debt claim;

• Lachman Consultants, Westbury, N.Y., with a $2.76 million trade debt claim;

• Robinson Pharma, Inc., Santa Ana, Calif., with a $1.81 million trade debt claim;

• Setco LLC, Anaheim, Calif., with a $1.78 million trade debt claim; and

• DMS Nutritional Products, Parsippany, N.J., with a $1.74 million trade debt claim.

The court appointed Shawn Hassel as chief restructuring officer of the company.

Leiner is a Carson, Calif.-based manufacturer of store-brand vitamins, minerals and nutritional supplements. The company filed for bankruptcy on March 10. Its Chapter 11 case number is 08-10446.

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