By Rose Krebs

Law360, Wilmington, Del. (March 12, 2020, 7:11 PM EDT ) A Delaware bankruptcy judge signed off Thursday on up to $12 million in post-petition financing for diabetes drug technology company Valeritas Holdings Inc., which cited the coronavirus outbreak's impact on its Chinese factories for its bankruptcy, as it moves 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 an order approving the debtor-in-possession financing from HB Fund LLC once a final version is submitted to the court.

The judge said although some DIP lender fees are "on the high side," she was OK signing off on the financing because stakeholders, including the committee of unsecured creditors, agreed on financing terms, so Valeritas has enough liquidity to move forward with sale plans.

Last week, Judge Silverstein gave the green light to Valeritas' sale procedures, after the debtors were able to negotiate a deal with the committee and prepetition lender agent CRG Servicing LLC for the lenders to share some estate proceeds if certain conditions are met.

Committee attorney Kelly D. Curtin of Porzio Bromberg & Newman PC told the judge Thursday that some provisions of the DIP order were also modified to potentially make more funds available to the unsecured creditors and committee professionals.

With the revisions, even though the committee had flagged some of the DIP lender's fees, the committee decided to withdraw its opposition to the financing, Curtin said. Judge Silverstein had already approved $5.5 million of the DIP with an interim order last month, with the full $12 million now set to be available to the debtors.

Under a deal reached with CRG that was highlighted at a hearing last week, prepetition lenders will subordinate some claims in certain instances, clearing the way for unsecured creditors to potentially get a distribution from the bankruptcy estate. Also, the committee will have the right to seek certain claims and causes of action such as those against officers or vendors, according to comments at the hearing.

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.

Valeritas is set to move forward with plans for an auction to seek potential offers better than the stalking horse bid, with a sale hearing slated for next week. 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.

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.

HB Fund LLC is represented by Adam G. Landis and Kerri K. Mumford of Landis Rath & Cobb LLP and Lucy F. Kweskin, Peter Antoszyk and Szeman Lam of Proskauer Rose LLP.

The prepetition lenders are represented by Daniel A. O'Brien, Jeffrey S. Sabin and Carol Weiner Levy of Venable LLP.

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 Haylee Pearl.

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