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December 9, 2020 – Further to modifications agreed at a December 3rd Plan confirmation hearing, the Debtors filed a revised Second Amended Prepackaged Plan and a related redline showing changes from the version filed on December 2nd [Docket Nos. 416 and 417, respectively]. The amendments relate to the implementation and mechanics of the Liquidating Trust Agreement and do not include any changes to the Debtors’ treatment of classes and claims otherwise summarized below. Assuming the Court is happy that the amendments reflect what has been agreed, a confirmation order is likely to be issued today [December 10th, although a deadline for Plan confirmation has been extended by one day to December 11th]. A deadline for Plan effectiveness has also been extended (from December 11th to December 14th) with failure to hit that mark resulting in the Plan being "null and void in all respects."
On November 10th the Debtors filed a Second Amended Prepackaged Plan and related redline showing changes from the version of the Plan filed on August 18th [Docket Nos. 339 and 340, respectively]. Significant amendments to the Plan at that point included, inter alia, terms relating to (i) a compromise and settlement agreed (after court- approved mediation) by the Debtors, the Supporting Noteholder and the Debtors’ newly formed Equity Committee (the “Existing Stock Settlement”) and (ii) the creation of a liquidating trust.
The Debtors' supplemental memorandum of law in support of their Second Amended Plan [Docket No. 389] provided a pre-confirmation hearing overview of the Plan.
The memorandum states, “The Second Amended Plan incorporates a global settlement among the Debtors, the equity committee appointed at the direction of the Court (the 'Equity Committee') and IEH Biopharma LLC as the sole holder of the Secured Notes and the Convertible Note (the 'Supporting Noteholder'). The revised Existing Stock Settlement resolves the parties’ disputes with respect to confirmation of the plan, the Debtors’ enterprise value and solvency, and recoveries available for stockholders under the Second Amended Plan – which plan the Debtors submit is fair and equitable and otherwise complies with the absolute priority rule and other applicable provisions of Bankruptcy Code. The Second Amended Plan, which has the full support of the Equity Committee, sets a clear path to emergence from chapter 11 under a plan of reorganization that has been pressure-tested by an adversarial process – including Court-ordered mediation – to ensure such plan is in the best interests of all of the Debtors’ stakeholders. In addition, all objections to the Initial Plan have been withdrawn or settled and, other than the objection filed by Mr. Dennis Dijkstra…there are no objections to the Second Amended Plan, and all informal comments have been resolved through clarifying or additional language in the revised proposed order approving the Disclosure Statement and the Solicitation Procedures and confirming the Second Amended Plan filed contemporaneously herewith (the 'Revised Proposed Confirmation Order').”
The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as in the Plan and/or Disclosure Statement; see also the Liquidation Analysis below):
- Class 1 (“Other Priority Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $3.3mn and the estimated recovery is 100%.
- Class 2 (“Other Secured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. The estimated recovery is N/A.
- Class 3 (“Secured Notes Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $65.6mn and the estimated recovery is 100%. On the Effective Date (i) The $61,351,000 (sixty-one million, three hundred and fifty one thousand United States Dollars) principal amount of the Secured Notes Claims shall at the option of the Debtors (and the Supporting Noteholder) or the Reorganized Debtors, as applicable be (a) paid in full in Cash from the proceeds of the Exit Facility or (b) exchanged dollar for dollar for new debt under the Exit Facility; and (ii) All unpaid prepayment premium, the applicable payment date fee, and accrued interest (collectively, in an amount not less than $4,199,135.11 (four million, one hundred and ninety-nine thousand, one hundred and thirty-five United States Dollars and eleven cents)), plus interest, reasonable and documented fees, expenses, costs, and other charges of the Secured Notes Trustee and the Supporting Secured Noteholder arising and payable under that certain Secured Notes Indenture shall be paid in full in Cash by the Debtors on the Effective Date from the proceeds of the Exit Facility.
- Class 4 (“Convertible Note Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $170.9mn and the estimated recovery is 76%. In full and final satisfaction, settlement, release, and discharge of, and in exchange for each Allowed Convertible Note Claims, on the Effective Date (i) the holder of the Convertible Note shall receive 100% of the Reorganized VIVUS Equity and (ii) any fees and expenses (including the Supporting Unsecured Noteholder’s and Convertible Note Trustee’s reasonable attorneys’ and other advisor fees and expenses) shall be paid in accordance with Section 2.5(b of the Plan.
- Class 5 (“General Unsecured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $20.2mn and the estimated recovery is 6%.
- Class 6 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan.
- Class 7 (“Interests”) is impaired, deemed to reject and not entitled to vote on the plan.
- Class 8 (“Subordinated Claims”) is impaired, deemed to reject and not entitled to vote on the plan.
About the Debtors
According to the Debtors: "VIVUS is a biopharmaceutical company committed to the development and commercialization of innovative therapies that focus on advancing treatments for patients with serious unmet medical needs."
The Oki Declaration adds: "VIVUS is a specialty pharmaceutical company with a twenty-one-year history of advancing innovative clinical therapies to address the therapeutic needs of patients with serious medical conditions and life-limiting diseases. The Company’s current approved therapies are: (i) Qsymia® ('Qsymia'), a chronic weight management therapy; (ii) PANCREAZE®/PANCREASE® MT ('Pancreaze'), a treatment of exocrine pancreatic insufficiency ('EPI') due to cystic fibrosis or other conditions; and (iii) STENDRA® ('Stendra'), an FDA-approved erectile dysfunction ('ED') medication, which has also been approved by the European Commission ('EC') under the trade name SPEDRA ('Spedra'). In addition to the three approved therapies, the Company is also developing a new medication—identified as VI-0106—with the potential to treat patients with pulmonary arterial hypertension ('PAH').
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