Akorn Settlement Award is... Complicated

Akorrn Litigation Ends with Cash, Stock, CVRs, and Headaches for Back Office Teams

Case Name: Akorn 2019 Securities Settlement

Settlement Fund: Between $53.6 million and $155.4 Million

Claim Filing Deadline: January 24, 2020

Class Period: 11/3/2016 – 1/8/2019

“What is up,” you say, “With that settlement range? Really, what gives?”

Oh, boy. It’s a tad complicated and involves cash, stock (or maybe the sale of stock to create cash), contingent value rights (that may include cash) and a few other twists and turns. The settlement notice details the terms in two pages that would stump a logic professor, and it is replete with phrases like “up to,” “if possible,” “to the extent that,” and “once we get them ducks in a row…” A summary of the settlement terms are below, but before I attempt the impossible and risk sending my reader into a legalese-induced trance, let me explain how CCC can help:

Filing claims for scores, or thousands, of accounts, is tricky enough. Allocating settlement funds can be even harder—and that’s true even when the settlement award is only a simple cash distribution. When a complicated settlement like this comes a long, many back-office specialists emit a groan and pray for the weekend. How exactly does one allocate a share of stock, or a CVR?

CCC makes complicated distribution as simple as we make class action monitoring and claim filing. We will file for every eligible trade, maximize your claim, and disburse each award—no matter how specialized—promptly. So are you daunted by settlement terms like in this new Akorn settlement? We aren’t. Call us today.

And now, as both a synthesis of the settlement notice and a sleep aid, here is CCC’s compressed version:

1. Cash: Up to $30 million.

2. Common stock: Up to approximately 8,735,705. That’s right: “approximately,” and it further brakes down into two subsets of quite specific approximations: “approximately 6,486,375 shares upon the final approval of the Settlement… (or sold and the cash proceeds distributed); and approximately 2,249,330 shares to be issued to the Settlement Class (or sold and the cash proceeds distributed) between the Effective Date and December 31, 2024, inclusive, as the shares become available due to the expiration of out-of-the-money options issued under Akorn compensation plans.”

Time out: yes, this is the compressed version. OK, back to the summary.

3. Contingent Value Rights, of which there are two benefits:

3a. Cash payments: “Annual cash payments over the CVRs’ five-year term in an amount for any year equal to 33.3% of Akorn’s “Excess EBITDA” (i.e., earnings before interest, taxes, depreciation and amortization (EBITDA) above the amount of EBITDA required to meet a 3.0x net leverage ratio, assuming a $100.0 million minimum cash cushion…” Well, why wouldn’t one assume that?

3b. Change in Control Payment or Bankruptcy Protection Claim: which (bear with us) then breaks town into either

(3b.1)a cash payment to the holders of the CVRs in the aggregate amount of $30.0 million upon certain change of control transactions during the term of the CVRs, provided the senior obligations and other debt for borrowed money of Akorn and its subsidiaries are repaid in full in cash;”

or (3b.2)a general unsecured claim on account of all CVRs in the aggregate amount of $30.0 million if the Company is the subject of a voluntary or involuntary bankruptcy filing during the term of the CVRs (which general unsecured claim will be subordinated to certain debt obligations of Akorn and its subsidiaries in accordance with the terms of the CVR Agreement).”

Lastly: “Akorn has agreed to work in good faith to cause the CVRs to be tradeable on the NASDAQ Global Market or another national securities exchange.”

If you did not follow all that, do not worry: our claim filing specialists and the distribution team have already committed it to memory.

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