Judge Approves KV's Bankruptcy Reorganization Plan

Article excerpt

A judge in KV Pharmaceutical Co.'s bankruptcy case has approved a reorganization plan for the Bridgeton-based drug maker.

The ruling, issued by Judge Allen Gropper on Wednesday, allows junior creditors to buy a majority stake in the company.

KV filed for bankruptcy in August 2012 in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan.

In a move that cleared a potential obstacle to the reorganization plan, KV agreed with the government on a $42.2 million program to pay off fines and penalties.

Before it filed for protection, KV still had $18.8 million owed in settlement of a False Claims Act suit with the government. In addition, its subsidiary Ethex Corp. had pleaded guilty to two felonies and was obligated to pay $23.4 million when bankruptcy began.

In November, the U.S. attorney in Manhattan started a lawsuit in bankruptcy court for a declaration that fines and penalties would not be wiped out in bankruptcy.

In the settlement filed with the bankruptcy court, KV will pay the government $5.4 million toward the criminal fine. The remainder of the fine will be paid in full in installments beginning in December and concluding in June 2018. And the false claims settlement will be paid in installments during the same period of time.

Originally, the plan called for holders of $225 million in first- lien notes to become the new owners in exchange for debt. The revised plan instead provides for holders of $200 million in convertible notes to be the new owners in large part. …