fate for K-V--exiting bankruptcy in the hands of senior bondholders with little recovery for other debtholders. Now, those debtholders are poised to see a substantial recovery, one that could continue to improve as negotiations could continue.
Under the plan proposed alongside the new investment agreement, senior bondholders owed more than $225 million will be paid in cash in full up to $231 million.
Convertible noteholders that aren't part of the investment group will receive 7% common stock in the reorganized K-V (up from 6% under the investor's last proposal) plus the rights to purchase up to $200 million in the rights offering. The previous rights offering was worth $85 million.
Unsecured creditors are receiving $10 million, a tenfold increase from the senior bondholder-sponsored plan that provided just $1 million. Under a more recent proposal, those creditors were slated to get $8.5 million.
After the investor group submitted its first offer, senior bondholders asked the court to hold off on approving that agreement as it formed what it said would be a superior offer. Although it has yet to file a formal offer fulfilling that promise, it has extended many of the original deadlines associated with the bankruptcy financing they provided.
K-V filed for Chapter 11 protection in August, embroiled in controversy over its preterm labor drug, Makena. The only drug with Food and Drug Administration approval to prevent preterm labor, Makena was expected to rake in profits for the company.
However, when K-V rolled out its pricing structure, $1,500 per injection, the medical community pushed back and didn't prescribe it, instead continuing to give patients a compounded version that cost far less.
The FDA declined to act to stop the cheaper versions from being produced by compounding pharmacies, and sales of Makena stayed low. Since then, sales of the drug have increased as compounding practices have come under scrutiny.
