CCS Medical files bankruptcy; first-lien lenders agree to support plan

By Caroline Salls

Pittsburgh, July 8 - CCS Medical, Inc. filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of Delaware.

According to an affidavit filed by chief financial officer Stephen M. Saft, the company has reached an agreement with holders of more than 70% of its first-lien credit agreement under which the lenders agreed to support the proposed terms of the company's plan of reorganization.

Under the proposed plan:

• The company's first-lien lender debt will be exchanged for $200 million in new notes, including a new $150 million five-year first-lien term loan and a new $50 million six-year second-lien term loan, and 100% of new equity in the reorganized company;

• Second-lien lenders are not scheduled to receive any distribution, provided, however, that their claims will be deemed allowed in full plus interest if they vote to accept the plan and they will receive their share of the warrant pool;

• Other secured and unsecured creditors are expected to receive cash or warrants for 5% of new common stock; and

• Holders of existing interests will receive no distribution.

Interest on the new first-lien term loan will be Libor plus 600 basis points, with a 3% Libor floor, and interest on the second-lien term loan will be Libor plus 800 bps with a 3% floor.

The company also expects to obtain an up to $25 million asset-based revolving exit facility.

EBITDA woes

Saft said CCS' bankruptcy filing was prompted by the company's "disappointing financial performance."

The CFO said the reimbursement rates for nebulized respiratory medications have been significantly reduced by Medicare since 2005, impacting the company's EBITDA results from 2006.

DIP loan terms

In connection with the bankruptcy filing, CCS has obtained a commitment for $10 million in debtor-in-possession financing from administrative agent Imperial Capital, LLC, affiliates and investment funds of Highland Capital Management, ECP Credit LLC and BlackRock, Inc.

The DIP financing will provide liquidity to fund the company's operating, working capital and capital expenditure needs while in bankruptcy.

The facility will mature on the earliest of four months from the anniversary of the interim order, the effective date of a plan of reorganization and upon closing of a sale of substantially all company assets. The company can elect to extend the maturity date by two months in exchange for a 2% extension fee.

Interest will be Libor plus 800 bps, with a 3% Libor floor.

CCS is required to pay a $250,000 commitment fee, a 3% upfront fee and backstop fee of 2% of the total commitments in excess of $4.85 million.

The company is seeking interim access to $5 million of the DIP financing.

Debt details

CCS had $259.12 million in assets and $538.48 million in debt at March 31, according to court documents.

The company's largest unsecured creditors include:

• Administrative agent Wachovia Bank, NA of Charlotte, N.C., with a $100 million bank loan claim;

• Administrative agent Bank of America of Charlotte, N.C., with an $82.17 million bank loan claim;

• Minimed Distribution Corp. of Chicago, with a $7.51 million trade debt claim;

• Lifescan, Inc. of Milpitas, Calif., with a $3.41 million trade debt claim;

• Animas Diabetes Care LLC of West Chester, Pa., with a $2.97 million contract/trade debt claim;

• Ropes & Gray LLP of New York, with a $1.3 million trade debt claim; and

• Becton Dickinson of Franklin Lakes, N.J., with a $1.11 million contract/trade debt claim.

CCS is a Clearwater, Fla., direct-to-consumer provider of medical supplies. Its Chapter 11 case number is 09-12390.

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