Vyaire - Notice of Filing Liquidation Analysis
- Date
- 2024-09-18
Summary
Exhibit 1 to a filing in Case 24-11217-BLS, filed September 18, 2024 as Doc 532-1: the Liquidation Analysis prepared by the debtors with their restructuring advisors AlixPartners, LLP for the Joint Chapter 11 Plan of Vyaire Medical, Inc. and its Debtor Affiliates. It is offered to show that the plan satisfies the best interests of creditors test in section 1129(a)(7) of the Bankruptcy Code by estimating recoveries in a hypothetical chapter 7 liquidation. It assumes conversion to chapter 7 on or about November 14, 2024, unaudited financials as of July 31, 2024, and a three-month liquidation under a trustee. Stated in thousands, it estimates total liquidation proceeds of $30,416 to $54,102, wind-down expenses of $26,820 to $27,970, and recovery of 3.4% to 24.5% on DIP claims of $106,565, with no recovery estimated on First Lien Claims of $314,147 or Second Lien Claims of $117,475.
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Case 24-11217-BLS Doc 532-1 Filed 09/18/24 Page 1 of 9
Exhibit 1
Liquidation Analysis
Case 24-11217-BLS Doc 532-1 Filed 09/18/24 Page 2 of 9
Exhibit B
Liquidation Analysis
Case 24-11217-BLS Doc 532-1 Filed 09/18/24 Page 3 of 9
1
LIQUIDATION ANALYSIS
Introduction
Under the “best interests of creditors” test set forth in section 1129(a)(7) of the Bankruptcy Code,
the Bankruptcy Court may not confirm a plan unless the plan provides each holder of an allowed
claim or interest that does not otherwise vote in favor of the plan with property of a value, as of
the effective date of the plan, that is not less than the amount that such holder would receive or
retain if the debtor were liquidated under chapter 7 of the Bankruptcy Code.
To demonstrate that the Plan satisfies the best interests of creditors test, the Debtors, with the
assistance of their restructuring advisors, AlixPartners, LLP, have prepared a hypothetical
liquidation analysis (the “Liquidation Analysis”), which is based upon certain assumptions
discussed in the Disclosure Statement and the accompanying notes to the Liquidation Analysis.
The Liquidation Analysis sets forth an estimated range of recovery values for each Class of Claims
and Interests upon disposition of assets pursuant to a hypothetical chapter 7 liquidation. As
illustrated by this Liquidation Analysis, Holders of Claims or Interests in Impaired Classes would
receive a lower recovery in a hypothetical liquidation than they would under the Plan. Further, no
Holder of a Claim or Interest would receive or retain property under the Plan of a value that is less
than such Holder would receive in a chapter 7 liquidation. Accordingly, and as set forth in greater
detail below, the Debtors believe that the Plan satisfies the “best interests of creditors” test set forth
in section 1129(a)(7) of the Bankruptcy Code.
Statement of Limitations
The preparation of a liquidation analysis is an uncertain process involving the use of estimates and
assumptions that, although considered reasonable by the Debtors based upon their business
judgment and input from their advisors, are inherently subject to significant business, economic,
and competitive risks, uncertainties, and contingencies, most of which are difficult to predict and
many of which are beyond the control of the Debtors, their management, and their advisors.
Inevitably, some assumptions in the Liquidation Analysis would not materialize in an actual
chapter 7 liquidation, and unanticipated events and circumstances could materially affect the
ultimate results in an actual chapter 7 liquidation. The Liquidation Analysis was prepared for the
sole purpose of generating a reasonable, good faith estimate of the proceeds that would be
generated, and the potential recoveries that would result, if the Debtors’ assets were liquidated in
accordance with chapter 7 of the Bankruptcy Code. The Liquidation Analysis is not intended and
should not be used for any other purpose. The underlying financial information in the Liquidation
1
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Joint
Chapter 11 Plan of Vyaire Medical, Inc. and its Debtor Affiliates [Docket No. 518] (as may be amended,
modified, or supplemented from time to time, the “Plan”) or the Disclosure Statement (as defined in the Plan), as
applicable.
Case 24-11217-BLS Doc 532-1 Filed 09/18/24 Page 4 of 9
Analysis and the values stated herein have not been subject to any review, compilation, or audit
by any independent accounting firm. In addition, the various liquidation decisions upon which
certain assumptions are based are subject to change. As a result, the actual amount of Claims that
would ultimately be Allowed against the Debtors’ Estates could vary significantly from the
estimates stated herein, depending on the nature and amount of Claims asserted during the
pendency of a chapter 7 case. Similarly, the value of the Debtors’ assets in a liquidation scenario
is uncertain and could vary significantly from the values set forth in the Liquidation Analysis.
The cessation of business operations in a chapter 7 liquidation is likely to trigger certain Claims
that otherwise would not exist under the Plan. The amount of additional Claims could be
significant, and some may be entitled to treatment as Administrative Claims, while others may be
entitled to priority in payment over General Unsecured Claims. The Liquidation Analysis does
not include estimates for such additional Claims, including, but not limited to: (a) the tax
consequences, either foreign or domestic, that may be triggered upon the liquidation and sale of
assets, (b) recoveries resulting from any potential preference, fraudulent transfer, or other litigation
or Avoidance Actions, (c) Claims that may be entitled to priority under the Bankruptcy Code,
including Administrative Claims under sections 503(b) and 507(b) of the Bankruptcy Code, (d)
environmental or other governmental Claims arising from the shut down or sale of the Debtors’
assets, and (e) additional unsecured and contract and lease breakage claims arising from a chapter
7 liquidation. More specific assumptions are detailed in the notes below. Additionally, certain
factors, such as an inability by the Debtors or a chapter 7 trustee (the “Trustee”) to maintain the
Debtors’ operations during the Liquidation Process (as defined below), a seizure of collateral by
secured creditors, and/or delays in the Liquidation Process may limit the amount of proceeds
generated by the liquidation of the assets. These factors could materially reduce the value of the
liquidation proceeds and yield significantly lower recoveries than those estimated in the
Liquidation Analysis.
ACCORDINGLY, NEITHER THE DEBTORS NOR THEIR ADVISORS MAKE ANY
REPRESENTATION OR WARRANTY THAT THE ACTUAL RESULTS OF A
LIQUIDATION OF THE DEBTORS WOULD OR WOULD NOT, IN WHOLE OR IN PART,
APPROXIMATE THE ESTIMATES AND ASSUMPTIONS REPRESENTED HEREIN. THE
ACTUAL LIQUIDATION VALUE OF THE DEBTORS IS SPECULATIVE AND RESULTS
COULD VARY MATERIALLY FROM THE ESTIMATES PROVIDED HEREIN.
In preparing the Liquidation Analysis, the Debtors estimated Allowed Claims based upon a review
of the Debtors’ financial statements to account for other known liabilities, as necessary. In
addition, the Liquidation Analysis includes estimates for Claims not currently asserted in the
chapter 11 cases, but which could be asserted and allowed in a chapter 7 liquidation, including
unpaid chapter 11 Administrative Claims, and chapter 7 administrative claims such as wind-down
costs and trustee and legal fees (together, the “Wind-Down Expenses”). To date, the Bankruptcy
Court has not estimated or otherwise fixed the total amount of Allowed Claims used for purposes
Case 24-11217-BLS Doc 532-1 Filed 09/18/24 Page 5 of 9
of preparing this Liquidation Analysis. Therefore, the Debtors’ estimate of Allowed Claims set
forth in the Liquidation Analysis should not be relied on for any other purpose, including
determining the value of any distribution to be made on account of Allowed Claims and Interests
under the Plan. NOTHING CONTAINED IN THE LIQUIDATION ANALYSIS IS INTENDED
TO BE OR CONSTITUTES A CONCESSION OR ADMISSION OF THE DEBTORS. THE
ACTUAL AMOUNT OF ALLOWED CLAIMS IN THESE CHAPTER 11 CASES COULD
MATERIALLY DIFFER FROM THE ESTIMATED AMOUNTS SET FORTH IN
THE LIQUIDATION ANALYSIS.
Basis of Presentation
The Liquidation Analysis has been prepared assuming that the Debtors would convert their current
Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code on or about November 14,
2024, which is assumed to be after the closing of both Sale Transactions (the “Liquidation Date”).
Except as otherwise noted herein, the Liquidation Analysis is based upon the unaudited financial
statements of the Debtors as of July 31, 2024, and those values, in total, are assumed to be
representative of the Debtors’ assets and liabilities as of the Liquidation Date. The Debtors, in
consultation with their advisors, believe that the July 31, 2024 book value of assets and certain
liabilities are a proxy for such book values as of the Liquidation Date. It is assumed that, on the
Liquidation Date, the Bankruptcy Court would appoint a Trustee to oversee the liquidation of the
Debtors’ Estates, during which time all of the assets of the Debtors would be sold and the Cash
proceeds, net of liquidation-related costs, would then be distributed to creditors in accordance with
applicable law: (i) first, for payment of liquidation, wind-down expenses, and Trustee fees
attributable to the Wind-Down Expenses; (ii) second, to pay the secured portions of the DIP
Claims; (iii) third, to pay the secured portions of the First Lien Claims; (iv) fourth, to pay the
secured portions of the Second Lien Claims; and (v) fifth, any remaining net cash would be
distributed to creditors holding unsecured claims against the Debtors, including, for the avoidance
of doubt, to pay amounts on General Unsecured Claims and any deficiency Claims that arise to
the extent of the unsecured portion of the Allowed Secured Claims.2
The Liquidation Analysis assumes operations of the Debtors and their non-Debtor Affiliates
(the “Liquidating Entities”) will cease on the Liquidation Date, and the related individual assets
will be sold during a three-month liquidation process (the “Liquidation Process”) under the
direction of the Trustee, utilizing the Debtors’ resources and third-party advisors, to allow for the
orderly wind down of the Debtors’ Estates. There can be no assurance that the liquidation would
be completed in such a limited time frame, nor is there any assurance that the recoveries assigned
to the assets would in fact be realized. Under section 704 of the Bankruptcy Code, a trustee must,
2
As set forth above, the Liquidation Analysis does not include estimates for Claims that may be entitled to priority
under the Bankruptcy Code, including priority unsecured claims and Administrative Claims under sections 503(b)
and 507(b) of the Bankruptcy Code. For the avoidance of doubt, such claims would be entitled to payment before
any distributions to creditors holding non-priority General Unsecured Claims.
Case 24-11217-BLS Doc 532-1 Filed 09/18/24 Page 6 of 9
among other duties, collect and convert the property of the estate as expeditiously (generally in a
distressed process) as is compatible with the best interests of parties-in-interest. The Liquidation
Analysis is also based on the assumptions that: (a) the Debtors have continued access to cash
collateral during the course of the Liquidation Process to fund Wind-Down Expenses and
(b) operations, accounting, treasury, IT, and other management services needed to wind down
the Estates continue. The Liquidation Analysis was prepared on an entity-by-entity basis for all
Liquidating Entities and is displayed below on a consolidated basis for all Debtors for convenience.
Asset Recoveries accrue first to satisfy creditor claims at the legal entity level. To the extent any
remaining value exists, it flows as equity to the applicable Liquidating Entity’s parent or
appropriate equity holder, as applicable.
Case 24-11217-BLS Doc 532-1 Filed 09/18/24 Page 7 of 9
DETAILED LIQUIDATION ANALYSIS
The following summary of the Liquidation Analysis for the Debtors should be reviewed in
conjunction with the associated notes.
Liquidation Analysis - Summary of Debtors
Recovery $ Recovery $
In $Thousands Note: Low High
Cash and Cash Equivalents [A] 1,566 1,566
Accounts Receivable [B] 2,006 2,452
Inventory [C] - 100
Ventilation and Respiratory Diagnostics Sales Proceeds [D] 21,534 23,534
Potential Causes of Action Recovery [E] 5,310 26,450
Equity in non-Debtor Subsidiaries [F] - -
Total Liquidation Proceeds $ 30,416 $ 54,102
Wind-Down Expenses [G]
Wind-Down Expenses $ 26,820 $ 27,970
Wind-Down Expenses Recovery 26,820 27,970
Wind-Down Recovery % 100.0% 100.0%
Net Proceeds from Liquidation $ 3,596 $ 26,131
DIP Claims $ 106,565 $ 106,565
DIP Recovery [H] 3,596 26,131
DIP Recovery % 3.4% 24.5%
First Lien Claims $ 314,147 $ 314,147
First Lien Recovery [I] - -
First Lien Deficiency Claims $ 314,147 $ 314,147
First Lien Recovery % 0.0% 0.0%
Second Lien Claims $ 117,475 $ 117,475
Second Lien Recovery [J] - -
Second Lien Deficiency Claims $ 117,475 $ 117,475
Second Lien Recovery % 0.0% 0.0%
General Unsecured Claims TBD TBD
General Unsecured Recovery [K] - -
General Unsecured Recovery % 0.0% 0.0%
Total Creditor Recovery $ 3,596 $ 26,131
Case 24-11217-BLS Doc 532-1 Filed 09/18/24 Page 8 of 9
Notes to the Liquidation Analysis
[A] Cash and Cash Equivalents: This cash balance represents the estimated balance as of the
Liquidation Date. A 100% recovery on cash and equivalents has been estimated for the low and
high scenarios.
[B] Accounts Receivable: The Debtors’ account receivable relates to select product lines not
acquired by a buyer and was evaluated by product category and aging. A portion of accounts
receivable relates to that of non-Debtor entities with no estimated material claims (estimated
liabilities are assumed to be satisfied through the international wind-down process) and is assumed
to be an asset of the Debtors. A recovery of $2.0 million to $2.5 million has been estimated for
the Debtors’ receivables.
[C] Inventory: Inventory represents portion of inventory not purchased by a buyer and consists
of various raw materials, finished goods and work in process. These assets have been evaluated
based on the likelihood of recoverability considering current state of value-add, the ability to re-
sell them, and the geographic dispersed nature of the assets. A de minimis recovery of $0 to $0.1
million has been estimated for the Debtors’ inventory based on individual recoveries assigned to
different inventory categories.
[D] Ventilation and Respiratory Diagnostics Sales Proceeds: Under a chapter 7 liquidation
scenario, both Sale Transactions are assumed to be consummated prior to the Liquidation Date,
with the proceeds of the Sale Transactions subject to the terms of the Sale Orders. As such, $21.5
million to $23.5 million has been estimated for the low and high scenarios, respectively, for the
holdback amounts provided to the Estates in accordance with the terms of the Sale Orders.
[E] Potential Litigation Causes of Action Recovery: The Trustee may have the potential to bring
litigation on behalf of the Debtors related to various potential Causes of Action. A portion of the
potential litigation relates to a non-Debtor entity with no estimated material claims (estimated
liabilities are assumed to be satisfied through the international wind-down process) and is assumed
to roll-up to be an asset of the Debtors. While the value of any potential litigation is speculative
and subject to many variables, the Debtors have estimated, for purposes of this Liquidation
Analysis, that there may be $5.3 million to $26.5 million of proceeds that could be received from
potential Causes of Action.
[F] Equity in non-Debtor Subsidiaries: Equity in non-Debtor subsidiaries represents residual
equity value of certain non-Debtor entities after debt and other claims have been paid at the
respective non-Debtor entities. Based on an analysis of the non-Debtor subsidiaries, no such
equity value is estimated to exist in a Liquidation Process.
[G] Wind-Down Expenses: Wind-Down Expenses represent the expenses associated with
administering the chapter 7 liquidation and existing chapter 11 administrative expenses. A 3%
trustee fee has been applied to non-cash asset recovery values and a $1.5 million to $2.0 million
Case 24-11217-BLS Doc 532-1 Filed 09/18/24 Page 9 of 9
cost for related legal and professional fees. Chapter 7 wind-down and operation expenses total
approximately $18.5 million. Additionally, an estimated $6.6 million of certain priority and
administrative liabilities have been included in the estimated Wind-Down Expenses. A full
recovery is estimated for Wind-Down Expenses.
[H] DIP Claims: DIP Claims represent the estimated Claims for the DIP. DIP Claims are
estimated to receive a 3.4% to 24.5% recovery.
[I] First Lien Claims: The First Lien Claims are entitled to a pro rata share of Distributable Value
under the Plan after satisfaction of Allowed DIP Claims. No recovery is estimated for the First
Lien Claims at this time.
[J] Second Lien Claims: The Second Lien Claims are entitled to a pro rata share of Distributable
Value under the Plan after satisfaction of Allowed DIP Claims and Allowed First Lien Claims. No
recovery is estimated for the Second Lien Claims at this time.
[K] General Unsecured Claims: The General Unsecured Claims include estimated deficiency
claims. Recovery on the General Unsecured Claims is estimated to be $0.
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