aaiPharma is in talks with lenders regarding Chapter 11 financing in the event the specialty pharmaceutical company needs to file. The company has also engaged FTI Consulting to advise it on restructuring its debt. According to a regulatory filing, the company has held discussions with its lenders and some note holders to negotiate a consensual restructuring, but to date none of the parties have agreed to the terms of any restructuring. Matthew Czajkowski, executive v.p. and cfo, did not return calls.
Currently, aaiPharma is seeking to obtain waivers from its lenders to increase its borrowings or gain access to other sources of liquidity. According to Arthur Wong, a Standard & Poor's analyst, following the situation, the company currently does not have access to its revolver under its senior credit facility and is incurring substantial losses from operations. The company does not expect to make a $10.5 million scheduled interest payment April 1 on $175 million of 11 1/2% senior subordinated notes.
The credit line is led by SilverPoint Finance and was arranged by Bank of America last year. It took out a term loan and revolver (LMW, 4/16). At the time the $135 million credit was priced at LIBOR plus 6 1/2%. The borrowings are now $175.5 million. "The business has been in decline for awhile now," said Wong. He explained that there is excess inventory while they have to keep on operating, which leaves negative cash flow. Importantly, since November, the company has sought to sell its pharmaceuticals division, but so far it has not received any acceptable offers.
