Molecular Insight chooses bondholder proposal, files amended plan

By Caroline Salls

Pittsburgh, March 8 - Molecular Insight Pharmaceuticals, Inc. has secured a plan of reorganization support agreement and exit financing commitment from some of its bondholders, according to a Monday filing with the U.S. Bankruptcy Court for the District of Massachusetts.

In addition, the company made changes to its previous plan of reorganization, which was based on a $45 million cash infusion from Savitr Capital LLC.

As previously reported, the Savitr agreement allowed the company to solicit an alternate transaction from other interested parties, including the bondholders.

Molecular Insight said the bondholders indicated that they would object to the original plan and submitted a proposal for an alternate transaction to be implemented through an agreed plan and financing.

Because of the difficulties that would be associated with trying to confirm the original plan over the objection of the bondholders, the company said its board of directors chose the bondholder plan as the superior proposal.

Molecular Insight said the bondholder proposal would reduce its debt by $162 million and provide a $40 million new capital infusion.

According to an 8-K filed with the Securities and Exchange Commission, the senior secured floating-rate bondholders have also committed to provide $10 million in debtor-in-possession financing.

The DIP facility will mature on the earliest of May 15, the effective date of the plan of reorganization, the sale of substantially all company assets and the conversion of Molecular Insight's bankruptcy case.

Interest will be 17.5%.

Molecular Insight has terminated its investment agreement with Savitr, effective March 2, according to the 8-K.

Under that agreement, Savitr is entitled to payment of a $150,000 break-up fee and reimbursement of $490,000 of its related expenses.

Bondholder proposal terms

Under the plan based on the bondholders' proposal:

• The consenting bondholders and their affiliates will provide $40 million of new capital under the five-year exit commitment. Interest on the exit facility will be 17.5%;

• The company's bonds will be converted into 100% of the new equity in the reorganized Molecular Insight;

• Holders of general unsecured claims will receive their share of $500,000 in cash; and

• Existing equity interests will be cancelled and holders will receive no distribution.

The company will be required to pay a $2 million upfront fee in connection with the exit facility.

In addition, Molecular Insight will pay an exit lender fee in the form of seven-year warrants to purchase shares of the company's series A convertible preferred stock, exercisable for 25% of the reorganized company's common stock, as well as a backstop fee in the form of seven-year warrants to purchase the series A convertible preferred stock exercisable for 6.5% of the reorganized common stock.

The exercise price will be $0.01 per share.

The bondholders' support agreement requires the plan to take effect by May 16.

Original plan comparison

Treatment of creditors under the original plan included:

• Holders of secured bond claims would have received a share of $45 million in tranche A initial new bonds, and all adequate protection amounts due under the company's cash collateral order would have been paid in full in cash;

• Holders of general unsecured claims would have received a share of $55 million in tranche B initial new bonds and contingent bond rights; and

• Holders of old Molecular Insight equity interests would have received no distribution.

A hearing on the plan support agreement is scheduled for March 16, and the amended disclosure statement hearing is set for March 23.

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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