Leiner Files Chapter 11

CARSON, Calif.—Leiner Health Products and certain of its U.S. affiliates filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in Delaware. Leiner intends to use the Chapter 11 process to restructure its debt obligations and explore the sale of the business. The filing does not include Leiner's Canadian subsidiary.

In conjunction with the filing, a group of pre-petition lenders has agreed to provide Leiner with $74 million in debtor-in-possession financing that, together with the company’s existing cash flow, will enable Leiner to fulfill obligations associated with operating its business, including payments to suppliers and other business partners for goods delivered and services provided on or after the bankruptcy filing. This financing arrangement is subject to court approval.

Leiner management stressed it will continue to manufacture, market and distribute its vitamins, minerals and nutritional supplements (VMS), as well as provide customer service and support for those products during the sale process.

Leiner President and CEO Rob Reynolds explained that a thorough analysis of Leiner’s financial condition indicated bankruptcy filing was prudent and necessary. "Although we have already taken many steps to address the challenges that arose following our March 2007 decision to voluntarily suspend OTC operations by streamlining our operations and manufacturing footprint, these actions were not enough to offset the cost of our substantial debt obligations," he said. "Filing for Chapter 11 allows Leiner to enhance its liquidity and to initiate a formal process for restructuring our debt and exploring the company’s sale in a timely manner."

Additionally, Leiner said it expects to file a variety of “first day motions” to support its employees, customers and suppliers. Upon court approval, the motion would allow Leiner to pay employees and employees in transition in the usual manner and to continue their health and welfare benefits without disruption. The company’s 401(k) profit-sharing plan is maintained independently and is protected under federal law; the plan will continue to be administered as usual.

Share this article: Email, Slashdot, Digg, Del.icio.us, Yahoo!MyWeb, Windows Live Favorites, Furl
Add this article feed to: RSS, My Yahoo, Newsgator, Bloglines