Molecular Insight bondholders group objects to investment agreement

By Lisa Kerner

Charlotte, N.C., Jan. 7 - Molecular Insight Pharmaceuticals, Inc.'s informal bondholders group filed an objection to the debtors' motion for an order authorizing assumption of an investment agreement, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Massachusetts.

As previously reported, in December Molecular Insight entered into a $45 million financing commitment from private investment company Savitr Capital LLC, to be completed through the company's Chapter 11 bankruptcy filing.

The company said it was forced to file bankruptcy to complete the investment after bondholders failed to accept the Savitr proposal.

According to the bondholders' filing, Molecular Insight is attempting "to circumvent the plan process with a hastily and ill-conceived agreement on a mere few weeks of notice to its principal creditor body."

The investment agreement "provides for a private party sale" that Molecular Insight's motion "seeks to dress up as an open public process."

"The investment agreement does not establish any framework within which the debtor commits to soliciting higher and better offers," the filing said.

Rather it is, according to the bondholders, "simply a bilateral agreement that obligates the debtor to sell itself as a reorganized going concern to the equity investor."

Savitr plan details

Molecular Insight announced previously that Savitr's investment would be in the form of 100,000 shares of common stock at $0.45 per share, representing 90% of the company's common stock.

The investment is conditioned upon the replacement of the company's $195 million of existing bonds, including all accrued pay-in-kind interest, by $90 million principal amount of secured notes.

The newly issued notes would mature in six years and bear interest at 6%, payable in the form of:

• PIK notes during the first 24 months;

• Either PIK notes or cash during the next 24 months, at the company's option; and

• Cash for the last 24 months.

One-half of the outstanding principal would be repayable on the fifth anniversary and the balance on the sixth anniversary of the note issuance date.

In addition to the notes, the holders of Molecular Insight's existing bonds would receive 10% of the company's common stock.

The Savitr investment requires the company to emerge from its corporate restructuring by March 31, adhere to a cash collateral budget and resolve various issues related to its Onalta drug candidate.

Under the investment agreement, Molecular Insight has 30 days to solicit other inquiries, proposals and bids from third parties who desire to propose an alternative transaction to the one proposed by Savitr.

Molecular Insight, a Cambridge, Mass.-based clinical-stage biopharmaceutical company focused on molecular medicine, filed for bankruptcy on Dec. 9. The Chapter 11 case number is 10-23355.

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