Bankruptcy News

Implant Sciences Objections Filed

Implant Sciences and the U.S. Trustee assigned to the case filed with the U.S. Bankruptcy Court separate objections to the official committee of equity security holders' motion to retain D.F. King & Co. to provide plan solicitation services. The Company asserts, "Simply put, the retention of D.F. King & Co. is unnecessary and not in the best of the Debtors' estates, shareholders or other parties in interest….Prior to this (self-created and purported) emergency filing, the Equity Committee made no effort to discuss with the Debtors either the necessity of D.F. King's proposed retention, or the nature and scope of services it seeks to have D.F. King provide in light of the services that KCC, who is the Debtors' previously engaged noticing and claims agent, would be providing in connection with solicitation of the Plan….The Application lays bare the fallacy of the Equity Committee's supposed 'concern' for the administrative burn in these chapter 11 cases - it proposes an entirely unnecessary and unreasonable expense to be borne by the Debtors' estates and ultimately the common shareholders, which is fraught with the potential to create even more unnecessary costs in the future. The Debtors cannot agree to for the needless expenditure of estate resources for a superfluous, targeted campaign that, as demonstrated by the Equity Committee's proposed Plan Support Letter, could potentially be rife with misstatements and mischaracterizations of fact, as well as unfounded, irresponsible personal attacks against the Debtors' management team."

Paragon Offshore Extension Approved

The U.S. Bankruptcy Court approved Paragon Offshore's sixth motion to extend the exclusive period during which the Company can file a Chapter 11 plan and solicit acceptances thereof through and including August 4, 2017 and October 3, 2017 respectively. As previously reported, "The Debtors have made great strides towards confirming a chapter 11 plan of reorganization and emerging from these proceedings. Since the time this Court granted their last exclusivity extension on April 28, 2017, the Debtors successfully participated in plan mediation with their three major creditor constituents - the Term Lenders, the Revolving Lenders, and the Creditors' Committee - and announced a global settlement of contested issues (the 'Plan Settlement'), filed the Fifth Plan and the Disclosure Statement, received approval of the Disclosure Statement, completed the solicitation of votes on the Fifth Plan, filed a Plan Supplement, commenced a U.K. administration (a prerequisite to effectuating the Fifth Plan), which was necessary to implement to effectuate the Fifth Plan, and will shortly appear before this Court to prosecute confirmation of the Fifth Plan. With the hearing on confirmation of the Fifth Plan scheduled to begin on June 7, the Debtors and their advisors are diligently working with the Consenting Creditors and their advisors to ensure that the Fifth Plan will be confirmed and, when confirmed, can be effectuated as quickly as possible."

Puerto Rico Bankruptcy: Uncertainty But Also Investing Opportunity

Because of special tax law provisions that exempt the territory's debt from not only federal taxes but also state taxes in every state, the bonds are widely held by investors across the country. Since the legal action is under a new law that has never been tested, there is tremendous uncertainty about how much creditors will recover and how long the process will take, but there may be opportunities for stock investors to profit from the island's restructuring as well--perhaps with less downside risk than in many of the bonds. We found four public companies based in Puerto Rico that could benefit from stabilization in the island's finances as well as three major insurance companies with exposure to Puerto Rican debt. Learn more:

Avaya KEIP Approval Sought

Avaya filed with the U.S. Bankruptcy Court a motion seeking entry of an order approving the Debtors' 3Q-4Q 2017 Key Employee Incentive Program (KEIP). The motion explains, "The Debtors request entry of an order approving the Debtors' 3Q-4Q 2017 Key Employee Incentive Program for up to 14 key employees for the Debtors' third and fourth fiscal quarters ending June 30 and September 30, 2017, respectively, and providing for payment an aggregate award pool of between $2.1 million and $3.2 million per quarter, subject to achievement of Threshold Adjusted EBITDA and the Emergence Milestones….The 3Q-4Q KEIP is designed to incentivize key members of management and maximize value for the estate. For example, the proposed 3Q-4Q KEIP incorporates an 'Emergence Milestone' component, under which 10% of an individual KEIP Participant's total award opportunity is tied to the date by which the Debtors emerge from chapter 11, thereby further incentivizing the speedy resolution of these chapter 11 cases. Additionally, the Adjusted EBITDA threshold proposed by the Debtors' proposed 3Q and 4Q KEIP of $178 million and $209 million, respectively, will require the Debtors to have exceeded their business plan for each of those periods by $9 million and $10 million, respectively - thereby requiring further outperformance by the KEIP participants for such goals to be achieved….Additionally, the proposed KEIP program is also reasonable on a market basis in absolute terms: a maximum quarterly award pool of approximately $3.2 and $2.8 million (for 3Q and 4Q, 2017 respectively) is less than 1.5% of the total Adjusted EBITDA required to earn the Target award....The 3Q-4Q KEIP will cost a total of approximately $4.6 million at threshold opportunity levels and $6.0 million at maximum opportunity levels - in each case assuming targeted performance and emergence goals are actually achieved; by comparison, the Debtors' prepetition balance sheet includes more than $6.0 billion of funded debt. At the maximum opportunity level, the 3Q KEIP's $3.2 million award level total reflects approximately 1.5% of the requisite Adjusted EBITDA performance of $219 million, and the 4Q KEIP's $2.8 million award level total reflects approximately 1.1% of the requisite Adjusted EBITDA performance of $252 million; and in each case the KEIP remains self-funding given that performance is measured net of the cost of the KEIP." The Court scheduled a July 13, 2017 hearing to consider the KEIP motion, with objections due by July 6, 2017.

Unilife M.O.R. Filed

Unilife filed with the U.S. Bankruptcy Court a monthly operating report for May 2017. For the month, the Debtors reported zero net loss on zero total revenue and paid $277,051 in administrative expenses and $948,333 in professional fees. The Company also reported cash disbursements of $2.8 million on $1.7 million in cash receipts, with negative net cash flow of $1.1 million. Cash at the beginning of the month was $2.5 million and $2.9 million at month's end.

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