KaloBios Pharmaceuticals Inc. won bankruptcy court approval of a reorganization plan that shrinks former Chief Executive Officer Martin Shkreli’s stake to about 14 percent.
U.S. Bankruptcy Judge Laurie Silverstein agreed to the plan at a hearing Wednesday in Wilmington, Delaware. The proposal was accepted by all classes entitled to vote and “all parties are receiving more than they would receive in a liquidation,” she said.
The drugmaker filed for bankruptcy in December, shortly after he was arrested on fraud charges related to other businesses he was involved in. He denies the allegations. As a result of additional shares being issued, Shkreli’s stake in KaloBios would shrink to about 14 percent from about 47 percent.
KaloBios also won approval of several settlements incorporated into the plan, including one with Shkreli. Under the settlement, which resolves Shkreli’s claim for legal costs stemming from his involvement with the company, KaloBios has the right to repurchase his shares at a discount, which could further reduce his holdings.
In exchange, the company released Shkreli from “all demands, claims, liabilities, damages, actions, causes of action, fines, penalties, expenses,” and other costs arising before or during the bankruptcy.
Shkreli may have to seek permission from the federal government to sell the shares. The trading account he used to buy them was pledged as security for his $5 million bail.
The bankruptcy is In re KaloBios Pharmaceuticals Inc., 15-12628, U.S. Bankruptcy Court, District of Delaware (Delaware).