WILMINGTON, Del. (Reuters) – Creditors to CCS Medical are hoping to reach agreement to bring the medical equipment supplier out of bankruptcy after a court rejected a plan backed by Highland Capital Management, a source said on Wednesday.
The plan to transfer the company’s ownership to creditors led by hedge funds of Highland Capital was rejected by Delaware Judge Christopher Sontchi last week for undervaluing the company.
The distributor of diabetes test strips and urological supplies had proposed transferring company ownership and $200 million in new debt to its first-lien lenders who were owed $350.3 million.
Second-lien secured lenders, who have claims of $112.8 million, opposed the plan which would have given them some cash or warrants for stock.
“The second-lien group hopes to work with the first-lien to effectively resolve this restructuring,” said the source close to the situation who declined to speak on the record because he was not authorized to do so.
Highland Capital, a hedge fund, is the largest holder of the company’s first- and second-lien debt, according to court documents.
Parties to the second-lien debt include Wachovia Bank as administrative agent, Bank of America (BAC.N) as syndication agent and JPMorgan Chase Bank (JPM.N) as documentation agent.
“The company is exploring all of its options,” said company spokesman Andy Brimmer.
At issue with the original plan was an analysis by financial advisors Goldman Sachs & Co, which valued the company at up to $286 million.
In rejecting the plan of reorganization, Sontchi questioned the methods used by Goldman.
“I really give in effect zero credence to the Goldman report,” Sontchi told a hearing last week. (Reporting by Thomas Hals; editing by Carol Bishopric)