SeraCare files Chapter 11 bankruptcy following acceleration of $20.3 million of bank debt

By Caroline Salls

Pittsburgh, March 23 - SeraCare Life Sciences, Inc. filed for Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the Southern District of California following a notice of acceleration from its senior lenders, accelerating $20.3 million in debt, according to a company news release.

As a result of its Chapter 11 filing, the company's $4 million of subordinated debt was also automatically accelerated. The company also has $2.2 million in promissory notes secured by a mortgage on its West Bridgewater facility.

According to an 8-K filing with the Securities and Exchange Commission, On March 17, SeraCare received a notice of default and acceleration from senior lenders Union Bank of California, NA and Brown Brothers Harriman & Co., which asserted breaches of some of the representations and warranties under its credit agreement based on various matters disclosed in its 8-K filed on March 15.

The default notice also asserted violations of financial covenants based on unaudited financial information provided to the senior lenders and cited the company's failure to deliver annual audited financial statements, as well as current borrowing base certificates, as additional covenant violations.

The senior lenders also terminated their commitments under the credit agreement and accelerated all of the company's credit agreement obligations.

According to the 8-K, the occurrence of an event of default under the credit agreement also triggers a cross default under the assumption and modification agreement between SeraCare and Commerce Bank & Trust Co., and Commerce Bank is entitled to accelerate the obligations under its promissory note.

The company said it believes that any efforts to enforce the payment obligations under the credit agreement, the subordinated note agreement or the assumption agreement are stayed as a result of the bankruptcy filing.

As of Wednesday, SeraCare had $24.2 million in cash securities, all of which is collateral for its outstanding senior and subordinated debt, and it said it intends to request court approval to use this cash as cash collateral during its Chapter 11 proceedings.

According to court documents, the company had $119.27 million in assets and $33.59 million in debt as of Feb. 28.

The company has no creditors with unsecured claims of $1 million or more.

"After careful consideration of available alternatives, the company's committee of independent directors determined that a Chapter 11 filing was a necessary and prudent step and the best way to position the company to continue to have access to the cash resources necessary to maintain regular operations and allow for a successful restructuring," chairman Robert Cresci said in the release.

"SeraCare has a strong foundation in place, with a professional and experienced workforce. Chapter 11 protection will provide us with the ability to address our financial challenges without disrupting our ability to continue to serve our customers and ship our products on a timely basis, consistent with our high quality standards."

SeraCare is an Oceanside, Calif., manufacturer and provider of biological products and services to diagnostic, therapeutic, drug discovery and research organizations. Its Chapter 11 case number is 06-00510.

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