M&A

2 November, 2009

Bankrupt CCS Medical urges creditors work out solution

WILMINGTON, Del., Nov 2 (Reuters) - Bankrupt medical equipment provider CCS Medical Inc [PPOWPM.UL] challenged its creditors to "put their money where their mouth is" to reach an agreement to sell the company or reorganize it.

A Delaware bankruptcy court judge rejected last month the company's proposed plan of reorganization that was backed by Highland Capital after finding problems with valuations of the company.

First-lien debtholders argued for a valuation between $229 million and $286 million. That would have given them the company's equity plus $200 million in debt to satisfy their $350 million in claims.

Second-lien secured lenders, who have claims of $112.8 million, objected. They argued the company was worth between $400 million and $500 million, which would have provided value for their claims.

Highland Capital hedge funds own a majority of both first and second-lien debt, according to court documents.

The company, which filed for bankruptcy in July, said it is in negotiations to "create a structure that forces each side to 'put their money where their mouth is,'" according to court filing.

"If the debtors are worth less than $350 million, then the first-lien lenders should be prepared to effectively sell their positions at a discount to the face amount of their claims. If on the other hand, the debtors are truly worth $400 million or more, as the second-lien group contends, the second-lien lenders would stand to make a significant profit if they buy the company or the first-lien debt at a level below $350 million," the company's filing said.

The company said it intends for its proposal to be the start of negotiations.

The case is In Re: CCS Medical Inc, U.S. Bankruptcy Court for the District of Delaware, No. 09-12390. (Reporting by Tom Hals, editing by Dave Zimmerman)

Source: http://www.reuters.com