KV Pharmaceutical Co.(fka KVPHQ)

[WSNewbee]

K-V Creditors Rejects Plan; Won't Delay Confirmation, K-V Says

Aug 22, 2013 13:36:03 (ET)


Stephanie Gleason

A class of K-V Pharmaceutical Co. (KVPBQ, KVPHQ) creditors has voted against the company's proposed bankruptcy-exit plan, complicating its attempt to implement this plan.

According to documents filed Wednesday with the U.S. Bankruptcy Court in Manhattan, two holders of unsecured claims, owed $4.12 million, or 69%, of the debt in the class, voted to reject the plan.

In order for the court to confirm a bankruptcy-exit plan, the Bankruptcy Code requires at least half by number and two-thirds by amount of claimants in a particular class--in this case, unsecured creditors of K-V Pharmaceutical Co.--vote to accept it.

However, K-V attorney Robin Spigel of Willkie Farr & Gallagher LLP said that the company doesn't believe the rejection is an impediment to confirmation of the plan.

"The overwhelming majority of creditors in the rejecting class accepted the plan," she said by email Wednesday. According to court documents, 95% by number voted to accept in that class--the two that voted against just happen to hold very large claims by amount.

Additionally, the company disputes the claim, she said, which is held by a creditor involved in litigation with K-V.

"The plan enjoys broad support by and among the Debtors' key constituencies and this will in no way slow down confirmation," she said.

Under the Bankruptcy Code, if the claim was deemed valid, K-V could still move forward with the plan if it paid creditors in that class in full.

The bankruptcy-exit plan is set to go before Judge Allan Gropper on Wednesday.

Prior to that hearing, Judge Gropper will rule on the still-pending issue of whether a group of senior bondholders is entitled to the interest that's accrued since K-V filed for bankruptcy last August on its debt, worth $235.8 million.

A trial on the matter took place Thursday, with both sides--the senior bondholders who want the interest and junior bondholders slated to become K-V's new owners--pulling apart the language of the agreement trying to prove the intended meaning of words like "including" and "replace."

K-V's bankruptcy-exit plan is sponsored by a group of junior bondholders--Greywolf Capital, Susquehanna International Group, Deutsche Bank Securities Inc. and Kingdon Associates--that invested $275 million in the company in exchange for equity in the restructured K-V.

It pays senior bondholders led by Silver Point Capital in full but leaves the question of so-called post-petition interest up to Judge Gropper to decide. Unsecured creditors are sharing $10.25 million in cash.

K-V filed for Chapter 11 protection while embroiled in controversy over its preterm labor drug, Makena. The only drug with Food and Drug Administration approval to prevent preterm labor, Makena was expected to rake in profits for the company.

However, when K-V rolled out its pricing structure--$1,500 per injection--the medical community pushed back and didn't prescribe it, instead continuing to give patients a compounded version that costs far less.

The FDA declined to act to stop the cheaper versions from being produced by compounding pharmacies, and sales of Makena stayed low. Since then, sales of the drug have increased as compounding practices have come under scrutiny.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Write to Stephanie Gleason at [e-mail]

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(END) Dow Jones Newswires

August 22, 2013 13:36 ET (17:36 GMT)