Medly creditors committee objects to DIP financing, bid procedures

By Sarah Lizee

Olympia, Wash., Jan. 3 – Medly Health Inc.’s official committee of unsecured creditors objected to the company’s motions seeking approval of debtor-in-possession financing and bid procedures for its assets, according to court documents filed with the U.S. Bankruptcy Court for the District of Delaware.

As background, the company is seeking final approval of a $12 million DIP facility from one of its prepetition secured lenders, TriplePoint Venture Growth BDC Corp.

An affiliate of TriplePoint, MedPharmaca Holdings, Inc., is serving as stalking horse bidder the company’s Pharmaca business line, which includes 22 stores.

The committee said the debtors and TriplePoint are trying to employ a “one-two punch” designed only to serve their interests.

“The debtors suggested process, as proposed, ensures that the debtors' unsecured creditors receive zero recovery before an independent party such as the committee can conduct a meaningful investigation into the value of the estates' rights including unexplored causes of action that appear to be of significant interest to the Triple Point parties either under a buy and bury strategy or to grab all of the estates' value inappropriately for themselves,” the committee said in court documents.

As a reminder, on the Dec. 9 petition date Medly Health announced that it was seeking authority to enter into the stalking horse agreement to sell the Pharmaca business for $18.5 million, less than the $20 million the debtors owe on account of first-lien debt.

Regarding the stalking horse agreement, the debtors sought approval for a break-up fee of $450,000 and a reimbursement for up to $500,000 in expenses.

Medly was also seeking approval for an accelerated sale timetable, including a bid deadline of Jan. 13, an auction date of Jan. 17 and a sale hearing of Jan. 19.

As reported, Regions 3 and 9 U.S. trustee Andrew R. Vara has asked the court to deny approval of the sale procedures and the stalking horse agreement. He took issue with the quick sale timeline and the bid protections.

The Boulder, Colo.-based pharmacy company filed Chapter 11 bankruptcy on Dec. 9 under case number 22-11257.

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