We have been making significant progress in our sale process with the hope of addressing our litigation and best positioning Akorn for long-term success. On May 20, 2020, we took decisive action to achieve this goal – Akorn filed for voluntary protection under Chapter 11 of the U.S. Bankruptcy Code and will use the process and legal protections provided by Chapter 11 to execute the sale of our business.
In light of the news of this Chapter 11 filing, many of you are probably wondering what this announcement means for Akorn, especially during these challenging times in the world. First and foremost, we expect to operate our business as usual, meeting our go-forward commitments to our associates, customers, partners and regulators. As we previously discussed, the Chapter 11 process is a tool that will allow Akorn to separate litigation overhang from the Company’s most valuable assets – our products, our people, our manufacturing facilities and our knowledge – so that we can move forward under new ownership that believes in the underlying strength of our business.
As you may have seen over the past few months, our products are being used on the front lines of the current global health crisis. The work that Akorn does – that you do – every day is providing a vital resource to those we serve. I am confident that this decisive action will allow us to continue this work for many years to come.
Following a thorough marketing and negotiation process, we announced a purchase agreement with certain of our existing lenders. In short, this means that a group of our existing lenders will be the foundational bidder in our court-supervised sale process, called a “stalking horse” bidder. We have also entered into this process with a support agreement signed by these lenders. As the “stalking horse” bidder, our lenders set a minimum purchase price for Akorn’s business. Though other potential buyers will have the chance to bid for our business, we are pleased that our lenders have shown their support for our continued growth.
Operating our Business and Meeting Obligations
We are confident in the underlying strength of our business and plan to continue meeting our obligations throughout this process, including our obligations to employees. To ensure we are able to continue operating as usual during this time, we filed a series of motions (known as “First Day” motions) with the Bankruptcy Court that are typical of the Chapter 11 process. These motions were heard and approved, either on an interim or final basis, by the Court on May 22, 2020. Additionally, all of our existing lenders have consented to our use of cash collateral and certain lenders have provided commitments for $30 million in debtor-in-possession (also called “DIP”) financing – $10 million of which the Court has already authorized us to access. Following final approval by the Bankruptcy Court, this financing will provide us with ample liquidity to fund and protect our business operations during the Chapter 11 process. We are confident that all of these actions will facilitate a smooth transition into Chapter 11 and through the rest of our sale process.
We do not foresee any change in your day-to-day work or responsibilities as a result of our filing, just as very little has changed since the commencement of our sale process. Your pay and benefit programs – health insurance, PTO, 401(k), etc. – will not be impacted by this announcement.
The Sale Process and Next Steps
The next step in our sale process is to collect any additional bids from buyers other than our existing lenders now that we are under Court supervision. Other qualified buyers will have the chance to submit a higher-value bid than our existing lenders, should they choose. If any bids exceed the value of our existing lenders’ bid, we will conduct an auction, which includes a day of bidding and negotiations. At the end of the auction, the “highest and best” bid will be chosen as the winning bid to be reviewed and approved by the Court. We will then work toward emergence from Chapter 11 under new ownership.
This announcement represents a key milestone in the process that will ultimately allow us to more wholly focus on our mission and ensure that our fundamentally strong business continues to grow. We expect to complete the sale and emerge as a more vibrant company that is even better positioned to improve patients’ lives through the quality, availability and affordability of our products. The below infographic provides more information on this process and the next steps for Akorn.
Thank you all for the dedication and patience you have shown throughout our sale process and these challenging times. I know that we are doing what is right for the Company – which will ultimately equip us to continue our vital work as a healthcare company, doing what is right for the world.
Doug Boothe, CEO
We do not foresee any change in your day-to-day work or responsibilities as a result of our filing, just as your work has changed very little due to other milestones in this process. You should continue to work as usual, following all previously announced guidelines due to COVID-19.
We have taken the necessary steps to ensure our wage, salary and benefit programs continue as normal during the duration of our Chapter 11 and sale process. This includes receiving authorization from the Bankruptcy Court to continue payment of associate wages, salaries, and expenses and continuation of associate benefit programs.
Associates should continue to work as usual, following all previously announced guidelines due to COVID-19. Additionally, you should continue to work with your colleagues in the U.S. just as you always have.
We created the below infographic explaining how a sale under Chapter 11 protection is executed.