Synergy Pharmaceuticals plan release provisions trigger SEC objection

By Caroline Salls

Pittsburgh, Feb. 22 – The disclosure statement for Synergy Pharmaceuticals, Inc.’s amended plan or reorganization drew an objection Thursday from the Securities and Exchange Commission, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

The SEC said the disclosure statement “describes a plan and ballots that provide for impermissible nonconsensual releases that purport to bind public shareholders, noteholders and securities class action claimants, and that also provide for a discharge of liquidating debtors in contravention of Section 1141(d)(3) of the Bankruptcy Code.”

While the Synergy debtors may claim that the third-party releases outlined in the plan are consensual, the SEC said its view is that “silence, in the form of a requirement to affirmatively ‘opt out’ of the releases, cannot constitute ‘consent’ to third-party releases.”

In addition, the SEC said the plan documents should include a carve-out for the government from third-party release provisions.

“The releases should be deleted from the plan, or, alternatively, the plan should be amended to state that the releases will not bind impaired shareholders, unsecured creditors and securities class action claimants, except those who elect to opt in to the releases,” the objection said.

Synergy is a New York-based biopharmaceutical company focused on the development and commercialization of novel gastrointestinal therapies. The company filed bankruptcy on Dec. 12, 2018 under Chapter 11 case number 18-14010.

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