Savient, unsecured creditors and noteholders settle collateral dispute

By Caroline Salls

Pittsburgh, Jan. 15 - Savient Pharmaceuticals, Inc. requested court approval of a settlement with its official committee of unsecured creditors and an unofficial committee of senior secured noteholders, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

Savient said the creditors' committee objected to its final cash collateral order, raising a number of issues with the proposed forms of adequate protection and claiming that it needed more time and an increased budget to investigate potential causes of action related to the validity and extent of pre-bankruptcy liens and collateral.

Specifically, the committee said it was investigating whether a May 2012 exchange transaction under which the company's secured notes were issued may have constituted a constructive fraudulent conveyance and whether any of the liens granted in favor of pre-bankruptcy secured parties may be avoided.

The creditors' committee said it also identified some assets that it believed were not part of the pre-bankruptcy collateral, which the creditor group should be available for distribution to unsecured creditors.

According to the motion, Savient and the noteholders' committee dispute the claims that the liens may be subject to avoidance or that any of the assets in question are not part of the pre-bankruptcy collateral.

Settlement terms

Under the proposed settlement,

• The collateral agent will carve out some sale proceeds to general unsecured creditor trust accounts, including $2.52 million in cash to be held for the benefit of general unsecured creditors and professionals and $100,000 in cash for a convertible notes trustee payment;

• Savient will transfer to the trust accounts 100% of proceeds of accounts receivable related to CVS Caremark Corp. litigation;

• Under a confirmed plan or alternative trust structure, specified claims and causes of action and related proceeds will be transferred to a liquidating trust;

• If Savient's plan does not take effect by June 30, the parties will create an unsecured creditor vehicle to facilitate the distribution of general unsecured creditor assets to those creditors;

• After payment of all administrative and priority claims, all of the company's cash or other assets will be distributed to the pre-bankruptcy secured parties until their pre-bankruptcy obligations and adequate protection obligations are paid in full;

• The final cash collateral budget will include $25,000 per month for payment of the creditors' committee's Delaware counsel from Jan. 1 through dissolution of the committee;

• The pre-bankruptcy secured parties will not receive any payment from general unsecured creditor assets on account of their deficiency claim; and

• The parties agreed to support a liquidating plan for Savient that incorporates the terms of the settlement.

A hearing is scheduled for Feb. 6.

Savient, an East Brunswick, N.J., pharmaceutical company, filed for bankruptcy on Oct. 15 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 13-12680.

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