Medly files bankruptcy, lines up DIP loan, stalking horse deal

By Sarah Lizee

Olympia, Wash., Dec. 12 – Medly Health Inc. filed Chapter 11 bankruptcy on Friday in the U.S. Bankruptcy Court for the District of Delaware.

Richard Willis, chief executive officer of the company, said in a declaration that after suffering a severe liquidity crisis this summer and fall, precipitated by a loss of anticipated financing and the discovery of “certain accounting irregularities,” the debtors, under new management, filed bankruptcy to preserve and maximize value for all stakeholders through one or more asset sales.

DIP financing

The debtors have lined up $12 million in debtor-in-possession financing from one of their prepetition secured lenders, TriplePoint Venture Growth BDC Corp.

Interest is equal to the U.S. Prime rate plus 900 basis points. Default interest would be an additional 500 bps. The loan is set to mature on Feb. 11, 2023.

The company is seeking interim access to $4 million of the loan.

Willis said without the financing, the debtors would have to cease operations and file Chapter 7 instead.

Sale process

The debtors’ operations fall along two business lines. The Medly pharmacies are geared toward specialized prescriptions and digital operations. The Pharmaca pharmacies, which the debtors acquired in 2021, have an emphasis on vitamins and supplements.

The debtors intend to seek approval of the sale of the four remaining Medly pharmacies’ prescription lists to ensure patients are able to transfer their prescriptions prior to the closing of those stores.

Second, the debtors will seek approval of bid procedures for the sale of the Pharmaca business line, which includes 22 stores, as a going concern. An affiliate of TriplePoint is serving as stalking horse bidder for these assets. The proposed purchase price is $18.5 million.

Bid protections include a $450,000 breakup fee and a $500,000 expense reimbursement.

Under the proposed bid procedures, bids would be due by 4 p.m. ET on Jan. 13, an auction would be held on Jan. 17, and a sale hearing would take place on Jan. 19.

Other details

In its petition, the company listed $100 million to $500 million in assets and $100 million to $500 million in liabilities.

The company’s largest unsecured creditors are Cardinal Health, based in Dublin, Ohio, with a $9.99 million trade debt claim, Anda Inc., based in San Francisco, with a $1.23 million trade debt claim, Morgan Lewis & Bockius LLP, based in Boston, with a $1.06 million professional fees claim, and JA Carpentry Inc., based in Hackensack, N.J., with a $1.06 million leasehold improvements claim.

Pachulski Stang Ziehl & Jones LLP is proposed bankruptcy counsel.

The Boulder-based pharmacy company filed Chapter 11 bankruptcy under case number 22-11257.

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