Large Scale Biology looks to defer priority, convenience class payments

By Caroline Salls

Pittsburgh, Sept. 13 - Large Scale Biology Corp. received court approval of changes to its disclosure statement for its plan of liquidation and received court approval to re-solicit some plan votes in an attempt to defer payments for its priority and convenience class claims, according to Tuesday filings with the U.S. Bankruptcy Court for the Eastern District of California.

In the motion to defer payments, Large Scale said it would not be able to make payments on its priority and convenience class claims because a proposed license agreement will not be completed in the near future. According to the filing, late in the negotiation process, the prospective licensee demanded fundamental changes to the agreement that Large Scale believed could jeopardize its ability to sell its remaining assets.

As a result, the company said it modified its plan of liquidation to request deferred payment of the priority and convenience claims and will re-solicit votes from the affected creditors.

Under the plan, both classes were to be paid in full on the effective date, with the total payment to priority claimants estimated at $730,000 and the total payments to convenience claimants estimated at $250,000.

The license agreement was expected to bring more than $500,000 to the estate and to at least partially fund payment to these creditors.

The company said it estimates that it will need to raise at least $750,000 through asset sales in order to pay on the priority and convenience claims.

Under the plan modifications, the company will distribute at least 25% of all net funds received if it closes a sale that nets at least $1 million before Dec. 31. The company will also distribute at least 25% of the net funds from sales after Jan. 1 whenever it accumulates at least $1 million net of costs of sale and secured claims.

According to court documents, investment bankers project a sale time frame of six to nine months or more.

The company said it would make the deferred payments as soon as feasible.

Previously, Large Scale said it will also ask the court to postpone the plan confirmation hearing to at least Oct. 10 from Aug. 31.

Large Scale Biology, a Vacaville, Calif.-based company developing therapeutic and industrial proteins, vaccines and diagnostic products for effective characterization and treatment of disease, filed for bankruptcy on Jan. 9, 2006. Its Chapter 11 case number is 06-20046.

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