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Law360, Wilmington, Del. (March 6, 2020, 5:27 PM EST ) A Delaware bankruptcy judge on Friday gave her approval to procedures for diabetes drug technology company Valeritas Holdings Inc., which cited the coronavirus outbreak's impact on its Chinese factories for its bankruptcy, to move forward with an expedited Chapter 11 sale.
During a hearing in Wilmington, U.S. Bankruptcy Judge Laurie Selber Silverstein said she would sign off on Valeritas' bidding procedures once a revised order is filed, and commended stakeholders for reaching a deal to settle the committee of unsecured creditors' opposition to the procedures.
"I will approve the bid procedures based on the compromises reached by the parties," Judge Silverstein said.
Valeritas attorney Maris J. Kandestin of DLA Piper said the debtors were able to negotiate a deal with the committee and prepetition lender agent CRG Servicing LLC during an hourlong delay of the hearing so the procedures could be presented to the judge on a consensual basis.
Committee attorney Kelly D. Curtin of Porzio Bromberg & Newman PC said that per the settlement, prepetition lenders are set to share some estate proceeds with unsecured creditors if certain conditions are met.
Also, CRG will subordinate some of its claims in certain instances, clearing the way for unsecured creditors to potentially get a distribution from the bankruptcy estate, Curtin said. Giving unsecured creditors the potential to "get value" from the estate was a "critical" factor for the committee, she added.
Under the deal, which has not yet been filed on the court's docket, the committee will also have the right to seek certain claims and causes of action such as those against officers or vendors, Curtin said.
Valeritas and three affiliates hit bankruptcy last month, saying years of losses and a one-two punch of late-year manufacturing problems and coronavirus-related production disruptions had sent it into default on its debt and left it no way to preserve the company other than a Chapter 11 sale with a $23 million stalking horse bid in hand from Denmark-based Zealand Pharma AS.
The New Jersey-based Valeritas manufactures V-Go, a patchlike insulin delivery device for Type 2 diabetics. The device is manufactured in China and has been on the market since 2012, the company said in its filings.
Now that bid procedures are in place, Valeritas is set to move forward with plans for an auction to seek potential better offers later this month. A sale hearing is also slated for this month. Per bid protections in place for Zealand, the stalking horse bidder is set to get a breakup fee of 3% of the purchase price, or roughly $690,000, and an expense reimbursement of up to $1 million.
The committee objected to the bid procedures late last month, flagging details such as all sale proceeds being slated to go to lenders and the speed of the sale process. Curtin said Friday that the committee has worked hard "to get up to speed" on the Chapter 11 and is pleased the deal reached "creates a possibility" of recovery for unsecured creditors.
Valeritas is represented by Maris J. Kandestin, Rachel Ehrlich Albanese and Matthew S. Sarna of DLA Piper.
The committee is represented by Jeffrey R. Waxman, Eric J. Monzo and Brya M. Keilson of Morris James LLP and Kelly D. Curtin, Robert M. Schechter and Brett S. Moore of Porzio Bromberg & Newman PC.
The case is In re: Valeritas Holdings Inc., case number 1:20-bk-10290, in the U.S. Bankruptcy Court for the District of Delaware.
--Additional reporting by Rick Archer. Editing by Abbie Sarfo.
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