Graceway Pharmaceuticals disclosure statement receives court approval

By Jim Witters

Wilmington, Del., March 1 - Graceway Pharmaceuticals, LLC received approval of the disclosure statement associated with its plan of liquidation during a hearing Thursday in the U.S. Bankruptcy Court for the District of Delaware.

The only change made during the hearing was the addition of a $1.4 million to $2.1 million range for the potential recovery from the pursuit of preference actions by the liquidating trustee or a Chapter 7 trustee.

Judge Peter J. Walsh approved the disclosure statement over the U.S. trustee's objections over a provision that deems non-voting impaired classes to have approved the liquidation plan.

Juliet Sarkessian, representing the trustee, argued that including the provision in the disclosure statement was premature and the issue is one for the confirmation hearing.

Because no voting had taken place, the provision was unnecessary, she said in the hearing.

Debtors' attorney Josef S. Athanas said the provision must be included in the disclosure statement to alert voters in all classes of the possible result of their failure to cast ballots on the liquidation plan.

The official committee of unsecured creditors supported inclusion of the provision.

"We want all the creditors to understand exactly what the impact will be should they choose not to vote," S. Jason Teele, representing the committee, said in the hearing.

Creditor treatment

As previously reported, treatment of creditors under the plan of liquidation will include

• Holders of administrative expense claims, priority tax claims and other priority claims will be paid in full in cash;

• Holders of first-lien facility claims will receive a share of any first-lien available cash, Nycomed litigation proceeds and beneficial interests in a liquidating trust, entitling them to further cash and avoidance action and cause of action proceeds;

• Holders of second-lien facility claims will receive liquidating trust interests entitling them to any available cash remaining after payment of first-lien claims;

• Holders of other secured claims will receive either the collateral securing the claims or cash;

• Holders of general unsecured claims will receive a share of other available cash not subject to liens granted under the second-lien facility after other claims have been paid in full; and

• Holders of intercompany claims, old equity and old equity rights will receive no distribution.

Graceway is a Bristol, Tenn.-based pharmaceutical company. It filed for bankruptcy on Sept. 29 under Chapter 11 case number 11-13036.

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