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Chapter 11 bankruptcy may involve sale of debtor's assets

As many Kentucky business owners know, a Chapter 11 bankruptcy, in which the debtor seeks to reorganize its debt structure while it continues to operate, can take many forms, depending upon the business of the debtor and the extent and nature of its financial obligations. A recently announced bankruptcy filing by a medical device manufacturer shows how even a Chapter 11 bankruptcy may result in the sale of most, if not all, of the debtor's property.

Unilife Corp. manufactures wearable drug delivery systems. The company and its two U.S. subsidiaries recently filed petitions under Chapter 11 seeking protection while the companies reorganize their debts. A key feature of the reorganization plan will be the sale, subject to the approval of the bankruptcy court, of all or substantially all of the three companies' assets in a court-supervised auction. According to the company's CEO, Unilife has arranged a $7.5 million debtor-in-possession line of credit from ROS Acquisition LP. The three sources of cash - operating revenues, proceeds of the auction and the line of credit - will allow the company to continue operating while it attempts to reorganize its debt and equity.

At the time of the bankruptcy filing, the company owned assets of $82.9 million and owed $201.1 million to various creditors. In a statement that accompanied the bankruptcy filing, the company's CEO said that after "an extensive review" of various alternatives, the chose "a balance sheet restructuring or sale through Chapter 11 as the best path forward at this time."

Whether Unilife can survive the sale of its assets and whether its creditors will accept the proposed reorganization of debt remains to be seen. Many businesses facing the possibility of bankruptcy face a similarly uncertain future. The advice of a knowledge and experienced bankruptcy attorney can provide helpful guidance on whether a liquidation or reorganization is in the company's best interests.

Source: York Daily Record, "Conewago Township-based Unilife Corp. files for Chapter 11 bankruptcy protection," Gary Hab4er, April 12, 2017

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