Muscle Pharm Corporation (MSLPQ)

[PeonyVMW]

Court filings show it's getting personal:

Filed on May 15th this past week, an adversary complaint from the secured noteholders (Empery and its affiliates) referencing the intercreditor/insubordination agreement signed when the notes were placed.

Paragraph six quoted here, if true, is disturbing:
Since his departure, in violation of the Intercreditor/Insubordination Agreement, Drexler has menaced and taken various actions to undermine and interfere with the recovery by Senior Creditor, as collateral agent for the Noteholders. For example, Drexler brought an action in Nevada state court against Senior Creditor; Drexler sued Tim Silver, a portfolio manager of Empery Asset Management, LP (“EAM”), Senior Creditor’s investment advisor, in yet another Nevada State Court, over communications Silver had with other creditors made “during the scope” of the Chapter 11 Case; and it is believed that Drexler launched a clandestine campaign to intimidate EAM’s principal, Ryan Lane, through anonymous communications to his spouse, his children’s school board, his neighbors and to members of the town in which he resides through posts on social media groups. Senior Creditor has and continues to successfully defend against these wrongful actions of Drexler outside of the Bankruptcy Court.

That's messed up.

All parties except Drexler are trying to speed up the hearing on enforcement of the Intercreditor/Insubordination agreement - this will pave the way for the second attempt at an asset sale via auction. You can read the filing showing the votes.

For reference, almost all parties are in agreement on the proposed Plan Term Sheet, the path forward for liquidating the remaining assets and value of MSLP. Empery's filed a response highlighting the $650,000 increase in expected expenses, blamed on Drexler's claimed excessive legal burdens. At its core, everyone else is agreeing the Intercreditor/Insubordination agreement that Drexler signed to receive the Notes handcuffs Drexler's ability to file legal challenges, and now that he is out of the company his own agenda is at odds with the fiduciary duties of the remaining Musclepharm officers.

On page 450 you can read this Intercreditor/Insubordination document and decide for yourself

Wrapping up, Drexler wants to appoint a trustee so he can insert a party that will negotiate his interests. Right now, Empery, White Winston Select, the unsecured creditors committee, other secured creditors like JW Nutritional are all in agreement with the Plan Term Sheet. Drexler is alone. What does that tell you about the motivations of the parties? Who is actually working towards a reorganization of the company, and who is trying to strip out any last cash they can? And let's not forget, these discussions in bankruptcy court are taking place between debtholders and the institutional shareholders. There are millions of dollars lost by individual retail investors during Drexler's reign as MSLP CEO and largest stockholder that have no say in the matter and can only watch from the sideline.

Based on the financing and proposed path forward, the Noteholders (aka Empery) are due to be paid first. Drexler isn't supposed to be paid until the noteholders are. The question being pondered - after the carcass of MSLP assets are liquidated on July 6th how much money will be generated to pay off the noteholders, and will anything else be left? Maybe the most likely answer to that question explains the actions here.