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aaiPharma in default on credit facility, lenders can block coupon
By Paul Deckelman
New York, March 30 - aaiPharma Inc. late Tuesday warned it will not be able to file its 10-K report with the Securities and Exchange Commission within the 15-day extension, putting it in default on its senior secured credit facility.
The lenders have informed aaiPharma that it will now be barred from making any borrowings from its $100 million revolving credit facility, the Wilmington, Del. pharmaceutical company said in a news release.
On top of that the lenders have the right to block the company from making a scheduled $9.6 million interest payment on the 11% notes that is due on April 1.
aaiPharma said that it is working with its lenders to develop a plan that would allow the interest payment to be made by April 30.
Even if that payment is made within the grace period, however, aaiPharma might still find itself in default under the indenture for the $175 million of bonds if it cannot make the 10-K filing within 60 days of Tuesday's notice of delay.
aaiPharma said it was unable to make the 10-K filing by the deadline because of the continued work of its internal investigating committee. It said that while the panel was making progress in its probe, "no timetable has been set for the completion of the review, the completion of the audit of the company's 2003 financial statements, or the filing of the Form 10-K."
aaiPharma announced on March 1 that it discovered what it termed "unusual sales" in two product lines - the pain-killer Darvocet and Brethine, an asthma drug - during the second half of 2003. aaiPharma withdrew its previously issued earnings guidance for the 2004 first quarter and full year, appointed a board committee and an outside law firm to investigate the apparent sales irregularities, and delayed filing its 10-K with the SEC. The report was to be filed on March 15, and the company got an extension to Tuesday.
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