Leiner files liquidation plan based on bank group, creditors' committee settlement

By Caroline Salls

Pittsburgh, July 21 - Leiner Health Products Inc. filed its plan of liquidation and related disclosure statement Friday with the U.S. Bankruptcy Court for the District of Delaware.

According to the disclosure statement, the plan is based on a settlement with the company's lender agent and its official committee of unsecured creditors.

Under that settlement, at least $249.5 million of the secured lenders' claim will be paid using proceeds from the $371 million sale of substantially all of the company's assets.

As long as the secured lender claim is paid in full in cash under the plan, the senior secured lenders have agreed to waive any post-bankruptcy interest and any right to enforce subordination rights against the holders of the company's senior subordinated notes.

In addition, an up to $8 million management backstop will be established, which could result in a reallocation of the proceeds of an asset sale incentive program to holders of general unsecured claims to ensure a guaranteed minimum distribution to those creditors.

Treatment of creditors under the plan will include:

• Holders of $5.33 million in administrative claims, $885,792 in priority tax claims, an unknown amount of other priority claims and $285.54 million in secured lender claims will recover 100% in cash;

• Holders of $343,438 in other secured claims will recover 100% either in cash or through the return of the collateral securing the claim;

• Holders of $211.89 million in general unsecured claims will recover 6% through their share of a liquidating trust fund; and

• Holders of equity interests and $139.24 million in canceled intercompany claims will receive no distribution under the plan.

A hearing on approval of the disclosure statement is scheduled for Aug. 21.

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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