Accentia, Biovest subsidiary emerge from Chapter 11 bankruptcy

By Caroline Salls

Pittsburgh, Nov. 17 - Accentia Biopharmaceuticals, Inc. and majority owned subsidiary Biovest International, Inc. emerged from Chapter 11 bankruptcy Wednesday "as fully reorganized organizations," according to a company news release.

"Today marks an exciting new beginning for Accentia and Biovest, as both companies have emerged as much stronger, more financially secure organizations," president and general counsel Samuel S. Duffey said in the release.

"As such, we are preparing to report significant new milestones that we believe will reflect the enormous growth potential for our companies.

"These events should cap off a highly successful year and set the stage for 2011 and beyond."

Accentia said the companies' plans of reorganization restructured their consolidated balance sheets by reducing outstanding debt, restructuring debt payment obligations and reducing operating expenses.

Under the plans, stockholders retained their common shares.

In addition, an important part of Biovest's confirmed restructuring was a previously announced $7 million financing for which ROTH Capital Partners, LLC acted as the exclusive placement agent.

Structural changes to some Biovest agreements are also now in effect, including the reduction of the outstanding royalty on BiovaxID sales to 6.3% from 35%.

This is expected to enhance Biovest's commercial and partnering opportunities.

Accentia creditor treatment

Creditor treatment under Accentia's amended plan now includes:

• Holders of administrative expense claims will have the option of being paid in full in cash or through a conversion of their claim into shares of reorganized Accentia common stock;

• Holders of priority tax claims and priority claims will be paid in full in cash;

• Holders of secured claims and other claims of Laurus/Valens will have an $8.8 million secured claim evidenced by 8½% two-year term notes, which can be converted into shares of common stock in the reorganized company;

• Holders of Southwest Bank secured claims will receive a 40-month 6% promissory note if they do not make a common stock conversion election;

• Holders of McKesson secured claims will receive a 40-month 5% promissory note if they do not make a common stock conversion election;

• 2006 debenture holders' secured claims will receive a new 8½% 18-month secured debenture;

• Holders of 2008 debentures will receive a 36-month 8½% promissory note if they do not make a common stock conversion election;

• Holders of other secured claims will receive a 40-month 5% promissory note if they do not make a common stock conversion election;

• Holders of 2007 debentures will receive a share of a promissory note with an automatic conversion feature;

• Holders of unsecured claims will have three treatment options. Under option A, these creditors would be paid in full in cash; under option B, they would receive shares of reorganized Accentia common stock; and under option C, they would receive a new two-year convertible promissory note;

• Holders of convertible preferred stock can elect to either convert their shares into new common stock at a conversion rate of $2.67 per share or receive a new two-year convertible promissory note;

• Holders of subordinated securities claims will be paid in full in cash;

• Holders of equity interests will receive one share of new common stock for each existing share; and

• Holders of subsidiary equity interests will retain their interests, but will receive no distribution.

Biovest plan terms

Under the Biovest plan:

• The company will establish a deferral of all scheduled interest and principal on senior secured debt;

• Intercompany debt owed to Accentia will be converted into equity;

• "Non-disruptive arrangements" will be made for payment to trade creditors;

• BiovaxID will be positioned for potential partnering and planned commercialization by reducing royalties based on sales of the cancer vaccine to 6.3% from 35%;

• The company will enhance the positioning of the AutovaxID bioreactor system to better capitalize on key pending partnering and commercial opportunities by eliminating all royalties based on the sales of this bio-production instrument, including the remaining $7.5 million balance of a previously guaranteed minimum royalty payment;

• Biovest's capital structure will be strengthened by canceling 23.4 million warrants held by its largest senior secured creditor to purchase Biovest common shares at an exercise price of $0.01 per share, while recognizing that creditor as a long-term holder of 9.99% of common stock;

• Holders of general unsecured claims will have three recovery options. Under the first option, unsecured creditors would be paid in full in cash plus post-bankruptcy interest at the end of the 40th month from the plan effective date.

Under the second option, unsecured creditors would convert their claims into shares of new Biovest common stock.

Under the third option, these creditors would receive a new 24-month convertible promissory note; and

• Current common shares will be preserved, and stockholders will be protected by avoiding a significant increase to fully diluted equity. Specifically, equity holders will receive one share of new stock for each share of existing stock.

Accentia, a biopharmaceutical company based in Tampa, Fla., filed for bankruptcy on Nov. 10, 2008 in the U.S. Bankruptcy Court for the Middle District of Florida. Its Chapter 11 case number is 08-17795.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.