Declaration Of Michael Schlappig
- Date
- 2024-07-08
Summary
A declaration by Michael Schlappig, a Managing Director at PJT Partners LP, filed July 8, 2024 as Doc 158 in In re Vyaire Medical, Inc., et al., Case No. 24-11217 (BLS), in the U.S. Bankruptcy Court for the District of Delaware. It supports the Debtors' motion to approve bidding procedures for the sale of substantially all of their assets and to authorize a stalking horse agreement with bid protections. The declarant describes PJT's retention and a marketing process in which 51 parties signed an NDA, with final bids due July 22, 2024. It sets out proposed dates including a sale hearing on July 31, 2024 and sale closing on August 19, 2024, and refers to $45 million of new money debtor-in-possession financing. The declaration is made under penalty of perjury.
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Case 24-11217-BLS Doc 158 Filed 07/08/24 Page 1 of 9
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
)
In re: ) Chapter 11
)
VYAIRE MEDICAL, INC., et al.,1 ) Case No. 24-11217 (BLS)
)
Debtors. ) (Jointly Administered)
)
DECLARATION OF MICHAEL SCHLAPPIG
IN SUPPORT OF THE DEBTORS’ MOTION
FOR ENTRY OF AN ORDER (I) APPROVING
BIDDING PROCEDURES IN CONNECTION WITH THE
SALE OF SUBSTANTIALLY ALL OF THE DEBTORS’ ASSETS, (II)
AUTHORIZING THE DEBTORS TO ENTER INTO A STALKING HORSE
AGREEMENT AND PROVIDE BID PROTECTIONS, (III) APPROVING THE
FORM AND MANNER OF NOTICE THEREOF, (IV) SCHEDULING AN AUCTION
AND SALE HEARING, (V) APPROVING PROCEDURES FOR THE ASSUMPTION
AND ASSIGNMENT OF CONTRACTS, (VI) APPROVING THE SALE OF THE
DEBTOR’S ASSETS FREE AND CLEAR, AND (VII) GRANTING RELATED RELIEF
I, Michael Schlappig, declare under penalty of perjury:
1. I am a Managing Director in the Restructuring and Special Situations Group at PJT
Partners LP (“PJT”), a leading investment banking firm listed on the New York Stock Exchange
with its principal offices at 280 Park Avenue, New York, New York 10017. The above-captioned
debtors and debtors in possession (collectively, the “Debtors”) intend to file an application seeking
to retain PJT as their investment banker in these chapter 11 cases.
2. I submit this declaration (this “Declaration”) in support of the relief requested in
the Motion of the Debtors for Entry of an Order (I) Approving Bidding Procedures in Connection
with the Sale of Substantially All of the Debtors’ Assets, (II) Authorizing the Debtors to Enter Into
1 The last four digits of Debtor Vyaire Medical, Inc.’s federal tax identification number are 6495. A complete list
of each of the Debtors in these chapter 11 cases and each such Debtor’s federal tax identification number may be
obtained on the website of the Debtors’ claims and noticing agent at https://omniagentsolutions.com/Vyaire. The
location of Debtor Vyaire Medical, Inc.’s principal place of business and the Debtors’ service address in these
chapter 11 cases is 26125 North Riverwoods Boulevard, Mettawa, Illinois, USA 60045.
Case 24-11217-BLS Doc 158 Filed 07/08/24 Page 2 of 9
a Stalking Horse Agreement and Provide Bid Protections, (III) Approving the Form and Manner
of Notice Thereof, (IV) Scheduling an Auction and Sale Hearing, (V) Approving Procedures for
the Assumption and Assignment of Contracts, (VI) Approving the Sale of the Debtors’ Assets Free
and Clear, and (VII) Granting Related Relief [Docket No. 16] (the “Bidding Procedures
Motion”).2
3. Except as otherwise indicated, all statements set forth in this Declaration are based
upon my personal knowledge, my discussions with other members of the PJT team, the Debtors’
management team, and/or the Debtors’ other advisors, my review of relevant documents and
information concerning the Debtors’ operations, financial affairs, and restructuring initiatives, or
my opinions based upon my experience and knowledge. If called as a witness, I could and would
testify competently to the statements set forth in this Declaration on that basis. I am not being
specifically compensated for this testimony other than through payments received by PJT as a
professional proposed to be retained by the Debtors.3 I am over the age of 18 years and authorized
to submit this Declaration on behalf of the Debtors.
Background and Qualifications
4. PJT is a leading global financial advisory firm with more than 1,000 employees in
eleven offices in the U.S., Europe, and Asia. The firm offers integrated advisory services for
mergers and acquisitions, restructuring and special situations, and fund placement. PJT is an
industry leader in advising companies and creditors in all aspects of complex restructurings and
bankruptcies. The firm has extensive experience providing financial advisory and investment
2 Capitalized terms used but not otherwise defined shall have the meaning ascribed to them in the Bidding
Procedures Motion or the Declaration of John Bibb, Group Chief Executive Officer of Vyaire Medical, Inc., in
Support of Chapter 11 Filing and First Day Motions [Docket No. 15], (the “First Day Declaration”) as applicable.
3 Pursuant to PJT’s engagement letter with the Debtors, subject to Court approval thereof, PJT will be entitled to
receive certain fees in connection with the transactions described herein.
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banking services to financially distressed companies. PJT is a registered broker dealer with the
United States Securities and Exchange Commission and is a member of the Securities Investor
Protection Corporation and is regulated by the Financial Industry Regulatory Authority.
5. I received a Bachelor of Arts in Economics and a Minor in French Area Studies
from Cornell University, and an MBA from Columbia Business School. I have approximately
eighteen (18) years of investment banking and restructuring experience. I have been employed by
PJT since October 2015, when PJT was spun off from The Blackstone Group L.P. (“Blackstone”).
Prior to PJT’s spin-off from Blackstone in 2015, I was a Vice President in Blackstone’s
Restructuring & Reorganization Group. Prior to joining Blackstone in 2010, I worked as an
investment banker at Lazard and at Banc of America Securities (now known as Bank of America
Merrill Lynch).
6. I have extensive experience advising companies and their stakeholders in chapter
11 restructurings, out-of-court workouts, and other distressed transactions, including the following
representative publicly disclosed transactions, among others: BW Homecare Holdings, LLC;
Cineworld Group PLC; Clearwire Corporation; Digicel Group Limited; Essar Steel Algoma Inc.;
Frontier Communications Corporation; GFG Alliance; GT Advanced Technologies Inc.; Ligado
Networks LLC; LightSquared Inc.; Magnum Hunter Resources Corporation; NII Holdings, Inc.;
Northpole Newco S.a.r.l; Pacific Drilling S.A.; Starry Group Holdings, Inc.; syncreon Group B.V.;
TerreStar Corporation/TerreStar Networks Inc.; Theia Group, Inc.; and Windstream Holdings, Inc.
The Prepetition Retention of PJT
7. In April 2023, the Debtors retained PJT as their investment banker to pursue
balance sheet alternatives. In April 2024, the Debtors expanded the scope of PJT’s engagement to
include investment banking services in connection with a potential capital raise, restructuring,
and/or the sale of Vyaire, in part or in full, through an in-court process, including assistance with
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the negotiation of the terms of the proposed debtor-in-possession financing (the “DIP Facility”)
and the restructuring support agreement (the “RSA”) in these chapter 11 cases. Based on PJT’s
work with the Debtors, members of the PJT team and I are familiar with the Debtors’ capital
structure, liquidity needs, and business operations.
The Marketing Process
8. As described in the First Day Declaration, the Debtors commenced these chapter 11
cases to address their balance sheet and liquidity challenges. In April 2024, the Company, with the
assistance of PJT and in coordination with the prepetition first lien lenders, began preparations to
launch a third-party marketing process (the “Marketing and Sale Process”) to solicit proposals for
any and all of the Debtors’ assets (the “Assets”) including for the Ventilation Assets, and separately
for the Respiratory Diagnostic Assets.
9. At the outset of the process, the Company, with PJT’s assistance, prepared a teaser
and compiled a list of over 100 potential parties comprised of both strategic and financial buyers.
Additionally, the Company, with PJT’s assistance, prepared detailed confidential information
memoranda (each, a “CIM”) for the Ventilation Assets and separately for the Respiratory
Diagnostic Assets, and populated a virtual data room (the “VDR”) containing substantial diligence
materials. On May 3, 2024, PJT commenced the formal market outreach and provided a teaser
and non-disclosure agreement (“NDA”) to potential purchasers. The outreach to potential
purchasers has resulted in 51 parties signing the NDA and receiving a copy of the CIM and access
to the VDR. PJT began distributing a formal process letter to the interested parties that signed
NDAs on May 13, 2024. The process letter set the submission deadline for indications of interest
on May 31, 2024, with final bids due no later than June 10, 2024. On June 4, 2024, the Debtors
added to the VDR a form asset purchase agreement expected to be marked-up by interested parties
as part of submitting final bids. Following commencement of the chapter 11 proceedings, on June
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13, 2024, PJT began distributing an updated formal process letter to interested parties that extended
the deadline for submission of final bids to July 22, 2024. While the Debtors have yet to select a
stalking horse bidder for the Ventilation Assets or Respiratory Diagnostics Assets, the Debtors
have received multiple indications of interest and are actively progressing diligence with various
parties. Pursuant to the Bidding Procedures Motion, the Debtors seek authority, in their discretion,
to designate one or more stalking horse bidders and offer certain bidding protections in furtherance
of facilitating a competitive sale process.
10. As set forth in the Bidding Procedures Motion, the Debtors are seeking approval of
the Bidding Procedures to establish a clear and transparent process for the solicitation, receipt, and
evaluation of bids on a court-approved timeline that allows the Debtors to timely consummate a
sale of their Assets.
The Bidding Procedures
11. I have reviewed the Bidding Procedures. Generally speaking, the Bidding
Procedures establish, among other things:
• the availability of due diligence materials and access to conduct due diligence review
by Prospective Bidders;
• the deadlines and requirements regarding a stalking horse bid, if any;
• the deadlines and requirements for submitting competing bids and the method and
criteria by which such competing bids are deemed to be “Qualified Bids” sufficient to
trigger the Auction, including the terms and conditions that must be satisfied and the
deadline that must be met by any bidder to be considered a “Qualified Bidder” and to
participate in the Auction;
• the manner in which Qualified Bids will be evaluated by the Debtors;
• the conditions for having the Auction and procedures for conducting the Auction, if
any;
• various other matters relating to the sale process generally, including the Back-Up Bid,
return of any good faith deposits, and certain reservations of rights; and
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• the following proposed key dates and deadlines:
Event Date
IOI Deadline July 1, 2024, at 4:00 p.m., prevailing Eastern Time
Bidding Procedures Hearing July 9, 2024
Stalking Horse Bidder Designation July 11, 2024
Stalking Horse Objection Deadline No later than four (4) days after the filing of the Stalking
Horse Notice, at 4:00 p.m., prevailing Eastern Time
Sale Transaction Objection July 22, 2024, at 4:00 p.m., prevailing Eastern Time
Deadline
Bid Deadline July 22, 2024, at 5:00 p.m., prevailing Eastern Time
Auction (if necessary) July 24, 2024, at 10:00 a.m., prevailing Eastern Time
Post Auction Objection Deadline July 25, 2024, at 4:00 p.m., prevailing Eastern Time
Adequate Assurance Objection July 29, 2024, at 4:00 p.m., prevailing Eastern Time
Deadline
Sale Hearing July 31, 2024, at 2:00 p.m., prevailing Eastern Time
(subject to the Court’s availability)
Sale Closing August 19, 2024
12. Based on my experience, I believe that the Bidding Procedures are designed to
maximize the value received for the Assets by facilitating a fair and competitive bidding process
where potential bidders are encouraged to participate and submit competing bids within the
specified time frame. As described in the Bidding Procedures Motion, the proposed Bid Deadline
requires binding bids for the purchase of the Assets to be delivered no later than July 22, 2024.
The Bid Deadline thus provides parties with approximately six (6) weeks from the filing of the
Bidding Procedures Motion and approximately eleven (11) weeks since the start of the Marketing
and Sale Process to obtain information, formulate, and submit a timely and informed bid to
purchase any and all of the Debtors’ Assets.
13. As discussed in the First Day Declaration, following extensive negotiations with
the ad hoc group of first lien lenders, the Debtors were able to secure $45 million of new money
debtor-in-possession financing and the consensual use of cash collateral. The timeline
contemplated by the Bidding Procedures is a requirement under such postpetition financing
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facility, which remains the Debtors’ best and only currently available source of liquidity to pursue
going-concern sales of their businesses. I believe continued pursuit of the Marketing and Sale
Process under the timeline contemplated by the Bidding Procedures is in the best interests of the
Debtors’ estates and their creditors, particularly in light of the extensive prepetition marketing
conducted by the Debtors.
Bid Protections
14. To the extent the Debtors seek to appoint one or more Stalking Horse Bidders, the
Bid Protections identified in any revised proposed Bidding Procedures Order are, in my view and
based on my experience, customary and reasonable and are in line with bid protections that stalking
horse bidders typically require. In the event the Debtors seek to appoint one or more Stalking
Horse Bidders, such appointment will be noticed to parties in interest in these chapter 11 cases and
subject to their right to object to such bid protections. I believe that authority to provide the Bid
Protections is in the best interest of the Debtors’ estates and their creditors, and a Stalking Horse
Bidder, if designated, would establish a floor for bidding that may ultimately increase the
consideration received by the Debtors in exchange for some or all of the Assets. I believe the
ability to appoint a Stalking Horse Bidder and provide such bidder with Bid Protections provides
the Debtors the necessary flexibility to pursue a value-maximizing transaction.
Conclusion
15. Given the outreach process launched by PJT for the Assets, the publicity
surrounding these chapter 11 cases, and the timeline proposed by the Debtors, it is my view, based
on my experience and in light of the circumstances, that the proposed postpetition sale process set
forth in the Bidding Procedures is reasonable and appropriate under the circumstances. At the
Auction, as set forth in the proposed Bidding Procedures, the Debtors will have an opportunity to
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consider all competing offers, including offers for any and all of the Debtors’ Assets, and select
the offer or offers that they deem to be the highest or otherwise best offer(s) for the Assets.
16. Accordingly, for all the foregoing reasons, I believe that the Bidding Procedures
and the timeline set forth therein: (a) will encourage bidding for the Debtors’ assets; (b) are
generally consistent with other bidding procedures previously approved in chapter 11 cases of
similar size and complexity; and (c) are appropriate under the circumstances. Given the details
described above and based on my experience as a restructuring professional and involvement in
other sales transactions, I believe that the Bidding Procedures are appropriate and should be
approved.
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Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the facts set forth in
the foregoing declaration are true and correct to the best of my knowledge, information, and belief.
Dated: July 8, 2024 /s/ Michael Schlappig
Michael Schlappig
Managing Director
PJT Partners LP
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