Supplements LT granted court approval for amended disclosure statement; confirmation hearing Oct. 7

By Jennifer Lanning Drey

Portland, Ore., Aug. 21 - Supplements LT Inc., formerly Leiner Health Products Inc., obtained court approval for the disclosure statement for its plan of liquidation Thursday from the U.S. Bankruptcy Court for the District of Delaware.

The plan confirmation hearing is scheduled for Oct. 7.

Just prior to the disclosure hearing, Supplements LT filed an amended disclosure statement that decreases the estimated amount of administrative claims to $554,068 from $5.33 million.

The amended plan also increases the estimated amount of general unsecured claims to $212.22 million from $211.89 million and changes the estimated recovery for this group to a range of 2% to 6%, rather than the straight 6% estimated in the prior plan.

The new plan also notes that secured lender claims will be reimbursed for out-of-pocket expenses, but changes the projected recovery to a range of 96% to 100%, as compared to the flat 100% recovery that was estimated in the prior plan.

Lender agent settlement

As previously reported, Supplements LT's plan is based on a settlement with the company's lender agent and its official committee of unsecured creditors.

Under that settlement, at least $249.5 million of the secured lenders' claim will be paid using proceeds from the $371 million sale of substantially all of the company's assets.

As long as the secured lender claim is paid in full in cash under the plan, the senior secured lenders have agreed to waive any post-bankruptcy interest and any right to enforce subordination rights against the holders of the company's senior subordinated notes.

In addition, an up to $8 million management backstop will be established, which could result in a reallocation of the proceeds of an asset sale incentive program to holders of general unsecured claims to ensure a guaranteed minimum distribution to those creditors.

Creditor treatment

Treatment of creditors under the plan will include:

• Holders of $554,068 million in administrative claims and $885,792 in priority tax claims will recover 100% in cash;

• Holders of other priority claims, although none are estimated, will also recover 100% in cash;

• Holders of $285.54 million in secured lender claims will recover 96% to 100% in cash, plus the full amount of related out-of-pocket fees.

• Holders of $343,438 in other secured claims will recover100% either in cash or through the return of the collateral securing the claim;

• Holders of $212.22 million in general unsecured claims will recover 2% to 6% through their share of a liquidating trust fund; and

• Holders of equity interests and $139.24 million in canceled intercompany claims will receive no distribution under the plan.

Supplements LT (Leiner) is a Carson, Calif.-based manufacturer of store-brand vitamins, minerals and nutritional supplements. The company filed for bankruptcy on March 10. Its Chapter 11 case number is 08-10446.

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