Pharmaca parent can tap $4M in Chapter 11 financing, judge rules
WILMINGTON, Delaware — Medly Health Inc., parent company of Boulder-based Pharmaca Integrative Pharmacy Inc., has received a bankruptcy court’s permission to begin drawing on $4 million in Chapter 11 financing, although the loan requires the company to complete the sales of millions of dollars worth of its assets within two weeks.
Medly filed for Chapter 11 bankruptcy protection on Dec. 9 in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. The filing requests that bankruptcy petitions for Medly Health and 31 of its affiliates, including Pharmaca, be jointly administered in the petition.
During a virtual hearing on Tuesday, U.S. Bankruptcy Judge Karen Owens gave Medly interim permission to access half of its $8 million in debtor-in-possession financing, despite concerns expressed at the virtual hearing from Linda Casey, a representative of the U.S. Trustee’s Office, that Medly could end up in default on that financing before the next hearing, which is scheduled for Jan. 3, if it failed to close on the sales.
Medly Health reported more than $110 million in secured debt and is seeking the court’s permission to sell its 22-store Pharmaca businesses. The filing listed both assets and liabilities of between $100 million and $500 million.
Brooklyn, New York-based Medly Pharmacy Inc. acquired Pharmaca in late 2021. Pharmaca was founded in June 2000 in Boulder as the nation’s first integrative pharmacy chain offering traditional pharmacy services alongside natural and complementary health solutions, including natural health and beauty products.
Medly was forced to file for bankruptcy after it failed to get a $100 million loan for which it applied last summer. In the court filing, the company said that made it impossible to buy the drugs it needed to fill prescriptions. As a result, it said, more than 20 of its stores closed.
As part of the bankruptcy filing, Medly agreed to provide up to $8 million in financing from affiliates of a lender, TriplePoint Capital. Provisions of the debtor-in-possession financing include a requirement that Medly must sell its prescription files as well as its TANGO340B LLC subsidiary, and close on those sales by Dec. 30. Under the terms of the agreement, however, lender TriplePoint could opt to grant a one-week extension. Medly’s attorney told the court on Tuesday that Medly expects the sales to provide $4 million in proceeds.
At the Jan. 3 hearing, Owen is expected to evaluate the procedures for bidding on the rest of Medly’s assets.
Medly filed for Chapter 11 with a stalking-horse bid from MedPharmaca Holdings Inc., which agreed to place a starting $18.5 million bid at a bankruptcy auction for just about all of Medly’s assets, including the Pharmaca stores. However, MedPharmaca would get a $450,000 breakup fee and up to $500,000 in reimbursed expenses if some other bidder wins the auction, according to the bankruptcy filing.
Medly operates 21 pharmacies in nine states, as well as four digital pharmacies and one health-and-wellness store in Seattle. It also owns the Pharmaca.com e-commerce site. Pharmaca stores in Boulder are at 2700 Broadway and 645 S. Broadway. Another store at 17th and Pearl streets closed in 2020.
Medly is represented by Laura Davis Jones, David Bertenthal, Timothy Cairns and Maxim Litvak of Pachulski Stang Ziehl & Jones LLP. The case is Medly Health Inc., case number 22-bk-11257.
Source: BizWest
