Graceway Pharmaceuticals LLC, a maker of skin treatments and asthma medication, won court approval of a $6 million bankruptcy loan to help fund operations while the company seeks to sell its assets.
U.S. Bankruptcy Judge Peter J. Walsh approved the financing, which will be provided by a Canadian affiliate of Graceway, at hearing today in Wilmington, Delaware. Walsh also approved the use of cash representing collateral for lenders.
The Canadian affiliate will enter receivership in Canada to aid the sale process. The loan and cash collateral are needed to avoid any “immediate and irreparable harm” and “if we do not draw on those funds before the receivership hearing we will not have access to those funds,” Caroline A. Reckler, a lawyer for closely held Graceway, told Walsh.
Graceway, based in Bristol, Tennessee, listed debt of as much as $1 billion and assets of as much as $500 million in Chapter 11 documents filed yesterday. Plunging sales following the loss of patent protection on its top-selling product led to the bankruptcy, Graceway said in court papers.
The company has agreed to sell virtually all of its U.S. and Canadian assets for about $275 million to Cham, Switzerland- based Galderma SA, according to court documents. Graceway plans to hold an auction to seek better offers.
“We believe there will be more than one bidder and hope that the price will rise,” Josef S. Athanas, another Graceway lawyer, told Walsh.
Graceway owes about $430.7 million to lenders with a first priority of repayment, court papers show. The drugmaker owes about $330 million to second-lien lenders and about $81.4 million to unsecured mezzanine lenders represented by Goldman Sachs Credit Partners LP as agent.
Trade and general unsecured creditors are owed about $30 million.
The case is In re Graceway Pharmaceuticals LLC, 11-13036, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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