Aceto of Port Washington files for bankruptcy

Aceto of Port Washington files for bankruptcy
The Aceto Corp's headquarters in Port Washington. (Photo courtesy of Google)

Aceto Corporation of Port Washington, a  generic drug manufacturing and chemical distribution company, announced Feb. 19 it was filing for bankruptcy and one week later its shares had dropped by more than 85 percent.

At the market’s close Feb. 19, shares of the company were valued at $1.03. But by market’s close the following Tuesday, shares had plummeted to 14 cents.

The corporation filed for Chapter 11 bankruptcy protection from its creditors and will sell off its subsidiaries in court-supervised auctions. It reported a loss of $316 million for fiscal 2018.

The bankruptcy filing enables the company to pay its 315 employees and handle day-to-day transactions until the corporation completes the sale of its business assets.

Until Aceto has a finalized buyer, it is unclear whether the company will maintain operations in Port Washington.

Aceto, which has overseas operations in nine countries as well as its domestic holdings, is located in the business park on West Shore Road at 4 Tri Harbor Court.

Aceto announced its entrance into a stalking horse agreement with New Mountain Capital, a New York-based investment firm, at the same time as the bankruptcy announcement.

A stalking horse agreement provides protections to the best bidder prior to the auction. The protection may increase the value of the bidder’s offer, which will be the opening offer for the auction, and can then ensure higher offers during the bidding.

New Mountain Capital said it plans to buy Aceto’s drug and chemical business assets for $338 million in cash “plus the assumption of certain liabilities and subject to certain adjustments, on a cash-free and debt-free basis.”

Typically, if there is higher offer during the auction, the corporation would pay the stalking horse bidder a breakup fee and reimburse incurred expenses in return for the bidder’s protection against low offers during the auction.

Aceto also announced its plans to enter into a stalking-horse agreement for its subsidiary, Rising Pharmaceuticals, before the end of fiscal year 2019 on June 30.

Aceto Chief Executive Officer William C. Kennally III said: “For the past several months, the board has been conducting a comprehensive evaluation of strategic alternatives to address the company’s debt burden in consultation with its financial and legal advisors while continuing to work cooperatively with its lenders.”

“After assessing its options, the board has determined that court-supervised sales of Aceto’s chemicals business assets and its subsidiary Rising Pharmaceuticals are in the best interest of the company and its stakeholders,” he said.

Aceto said it will continue on its ordinary course of business until the sale of its chemical businesses and Rising Pharmaceuticals is complete.

A  syndicate of lenders led by Wells Fargo has lent the corporation $60 million for debtor-in-possession financing that Aceto will use to fund its working capital needs and to pay suppliers and vendors until the company’s purchase is finalized.

Aceto may no longer be listed on the Nasdaq after failing to file the proper documentation on Dec. 31.

The corporation has until April 14 to “submit a plan to regain compliance” with the listing rule.

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