Leiner starts solicitation for prepackaged Chapter 11

New York, Jan. 31 - Leiner Health Products Inc. said it has begun asking its bank lenders and bondholders to support a proposed reorganization through a prepackaged Chapter 11 filing.

The Carson, Calif. vitamin and supplement company said it has begun mailing ballots and a disclosure statement for the plan.

Holders of 80% of its outstanding 9.625% senior subordinated notes due 2007 have already entered into forbearance and lock-up agreements that include supporting the reorganization and holders of 93% of the bank debt have also entered a lock-up that includes support for the plan, Leiner said.

Under the proposal, Leiner's business operations will continue as normal and suppliers will be unimpaired. Leiner's Canadian business would also continue as usual and Vita Health's creditors will not be impaired, the company said.

As part of the reorganization, Leiner's existing equity investors led by North Castle Partners will make a new equity investment of $20 million in the company.

Noteholders will receive a combination of cash and new preferred stock in exchange for their bonds, reducing Leiner's debt by $85 million.

The bank debt will be restructured and remain outstanding and the company will obtain a new $20 million revolving credit facility.

If the plan achieves the necessary support, Leiner expects to make its Chapter 11 filing by the end of February and emerge from bankruptcy "a few months" later.

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