Teligent DIP financing draws objection from unsecured creditors

By Sarah Lizee

Olympia, Wash., Nov. 2 – Teligent, Inc.’s official committee of unsecured creditors objected to the company’s proposed $12 million debtor-in-possession financing package from its senior secured lenders, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee said the DIP motion and supporting first-day declaration don’t disclose the fact that several weeks before the Chapter 11 filing, the debtors made the decision to permanently cease all product production.

“The debtors have told the committee that they have halted all ongoing production operations as of Oct. 22, and that they have no intention of resuming those operations or attempting any further remediation to resolve the pending FDA issues,” the committee said in its objection.

The group said that any restart of the debtors’ business will have to await a new owner.

“These undisclosed facts push what was already a questionable DIP proposal beyond the pale,” the committee said. “There is simply no basis to grant the extraordinary relief the DIP motion seeks, including two roll-ups and the transfer of all value from the debtors to the secured lenders in a case, like this one, that involves a straightforward liquidation of a dormant business.”

The committee also noted that, on the eve of bankruptcy, the secured lenders created a liquidity crisis with the debtors by forcing them to repay $10 million.

“Now, only a few weeks later, the debtors come to this court asking for extraordinary relief to not only fix the liquidity problems the secured lenders created, but to actually reward their machinations by putting more money in their pockets and improving their pre-petition position,” the committee said.

Specifically, the proposed DIP facility includes separate roll-ups of the first-lien lenders’ and second-lien lenders’ pre-petition debt totaling $42.7 million, liens on avoidance actions and other previously unencumbered assets, and “impossibly tight” sale milestones, all in return for only $12 million in new money, $10 million of which the first-lien lenders “took from the debtors right before the filing,” the committee said.

DIP terms

The DIP package consists of a $6 million senior revolving credit facility and a $6 million junior term loan facility, as previously reported. An interim order gave the company access to $3 million of each facility.

A roll-up of about $34.88 million of pre-petition term loan and revolving credit facility debt will be included in the DIP financing following a final order.

ACF Finco I LP will serve as administrative and collateral agent for the senior DIP facilities, and Ares Capital Corp. will serve as term loan agent for the junior DIP facilities.

The facility will mature on Jan. 31 and bear interest at Libor plus 650 basis points for senior loans and Libor plus 850 bps for junior loans.

There is a 1% exit fee and a 0.5% unused line fee.

Teligent is a Buena, N.J.-based specialty generic pharmaceutical company. The company filed bankruptcy on Oct. 14 under Chapter 11 case number 21-11332.

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