As a local economic development official recently presented tax abatement compliances for 12 Seymour companies, he mentioned one of them has filed for Chapter 11 bankruptcy.
Lannett Co. Inc., a Trevose, Pennsylvania-based company that has a facility at 1101 C Ave. West in the Freeman Field Industrial Park in Seymour, made that announcement May 2.
That was nearly a week before the Seymour City Council meeting when Jim Plump, executive director of Jackson County Industrial Development Corp., spoke on behalf of the local industries, including Lannett, which has one abatement for real estate improvements and five for qualified personal property.
Lannett develops, manufactures, packages, markets and distributes generic pharmaceutical products for a wide range of medical indications.
“The most recent tax abatement, which was granted last year, the project is still ongoing with completion hopefully expected by the end of this year,” Plump told the council.
The abatements are on a $58.8 million investment, compared to the company’s projection of $57.3 million, he said.
He also gave full disclosure of the bankruptcy filing.
“It obviously has been well documented that the company has downsized over the last few years,” Plump said. “I think it’s important to realize they still employ 402 workers with salaries of $29.6 million.”
He said the local facility also has one real property, a 116,000-square-foot warehouse, with a projected cost of $6 million and the actual investment was $9.2 million.
After Plump finished reporting on the compliances, Councilman Chad Hubbard asked if the bankruptcy would affect production in Seymour and asked about the future plans for the facility. That’s when local company representatives Tom Lewis and Rick Archer came forward.
“It will not have any effect on Seymour whatsoever,” said Lewis, associate vice president of supply chain. “It’s basically Chapter 11 reorganization. Lannett was pretty strong with cash position at the end of the third quarter. At the end of March, we had $47 million in the bank in cash.”
He said there’s $660 million in debt against the company, and debtholders have agree to transition from a publicly traded company to a privately traded company. As a result, that will retire $597 million of that debt, leaving Lannett with about $60 million, so overall, a much stronger organization, Lewis said.
Councilman Bret Cunningham asked about this being behind the company in about 45 days.
“This bankruptcy is pretty quick,” Lewis said. “We have what’s called a prepackage, which is a lane between the shareholders or existing board of directors and debtholders. A prepackage basically sets precedence of how an operation is going to go forward. That was sold prior to filing of Chapter 11 and would be out of bankruptcy within 45 days.”
According to a news release on Lannett’s website, the company said it and certain subsidiaries have begun prepackaged Chapter 11 cases in the U.S. Bankruptcy Court for the District of Delaware to execute the transactions contemplated by the restructuring support agreement announced May 1.
The restructuring transactions will substantially delever the company’s balance sheet, positioning Lannett with sufficient liquidity to implement its business plan, including efforts to launch several pipeline products.
The company entered into the RSA with significant support of key stakeholders, including holders of more than 80% of its senior secured notes and 100% of its second lien term loan, seeking to significantly improve its financial position by eliminating approximately $597 million of funded debt through conversion of the secured debt into equity in the newly reorganized company, according to the news release.
“The significant support of our debtholders and other stakeholders demonstrates their confidence in the company’s business plan and Lannett’s long-term strategy,” Chief Executive Officer Tim Crew said in the news release.
“Commencing our Chapter 11 cases is an important step toward strengthening our financial position, and we intend to move through this process quickly and without disruption for our customers and partners,” he said. “We believe that implementing these transactions will enable us to continue manufacturing and producing safe, life-enhancing and affordable generic pharmaceutical medicines.”
The prepackaged plan advances Lannett on its path to sustainable growth with a focus on developing new complex products and more competitive, higher-margin cost structures. The company continues to anticipate near-term product launches and significant progress on more specialized technologies and capabilities supporting new product development, the news release states.
In April, the company announced it received positive results from the pivotal clinical trial of biosimilar insulin glargine and is moving forward expeditiously to complete the biologics license application with the goal of submitting the application to the Food and Drug Administration within the next several months.
Lannett says it is expected to operate in the ordinary course of business through the Chapter 11 process. The RSA and prepackaged plan provide for vendors, employees and other partners to be paid in the ordinary course of business for obligations incurred prior to and after the commencement of the Chapter 11 cases.
The company says it has sufficient liquidity to operate its businesses, including the payment of all such obligations. Lannett expects to move through the process seamlessly, emerging as a stronger company better able to build for the future, according to the news release.
Additional information regarding the company’s process is available online at omniagentsolutions.com/LCI. Anyone with questions related to the restructuring may call the company’s claims agent, Omni, at 888-481-0009 or email inquiries to [email protected].
For information about Lannett, visit lannett.com.