OptioRx Gets Approval For $43M Debt-Equity Swap Ch. 11 Plan

A Delaware bankruptcy judge Friday approved compounding pharmacy OptioRx’s plan to exit Chapter 11 under a pre-bankruptcy agreement to trade $43 million in debt for equity.

U.S. Bankruptcy Judge Thomas M. Horan approved the plan, rejecting arguments by the U.S. Trustee’s Office that it could be interpreted to release claims against non-debtor parties without notice to the claim holders.

“There’s nothing in here that is going to affect any non-consensual release of a claim against a third party,” he said.

OptioRx filed for bankruptcy in June with more than $235 million in debt, saying that after a failed attempt to change its business focus two years ago, it was no longer able to keep up with its debt payments.

Under a restructuring support agreement reached in May, senior secured creditors agreed to exchange $43 million of their debt for equity and roll over their remaining $85 million in debt into an exit facility, as well as provide $2 million to pay off vendor claims over the next year.

The company also reached a $275,000 deal with its unsecured creditors’ committee to settle general unsecured claims and $30 million in unsecured note claims.

The plan faced opposition from the U.S. Trustee’s Office, which argued it included overly broad liability releases for third parties, but at Friday’s hearing, counsel for OptioRx and the trustee said a number of the issues the trustee had raised had been resolved.

U.S. Trustee counsel Jonathan Lipshie, however, said his office was still concerned that the wording of the plan released third-party claims held by parties “related” to releasing parties, such as employees. Those parties would not have received notice of the bankruptcy or the opportunity to consent to the releases, violating the U.S. Supreme Court’s finding in the Purdue Pharma case that third-party releases must be consensual, he said.

OptioRx counsel William Chipman responded that the plan makes it clear that those claims have not been released.

“We’re not trying to get around Purdue, we’re not trying to release third-party claims,” he said.

Judge Horan accepted the argument, saying the plan makes it “crystal clear” parties are not being forced to release third-party claims.

He also rejected the U.S. Trustee’s argument that the wording of the plan improperly presents it as a settlement and that the proposed injunction enforcing the claims releases is unnecessary, saying the wording was proper and the injunction is a common provision in plans in the district.

OptioRx is represented by William E. Chipman Jr., David W. Carickhoff, Mark D. Olivere and Alan M. Root of Chipman Brown Cicero & Cole LLP.

The unsecured creditors’ committee is represented by Evan T. Miller, Nicholas Smargiassi, Michelle G. Novick and Turner N. Falk of Saul Ewing LLP.

The U.S. Trustee's Office is represented in-house by Joseph J. McMahon Jr. and Jonathan W. Lipshie.

The case is In re: Optio Rx LLC et al., case number 1:24-bk-11188, in the U.S. Bankruptcy Court for the District of Delaware.

—Editing by Vaqas Asghar and Kelly Duncan.