Amyris secured creditor Lavvan has appealed to the U.S. District Court for the District of Delaware seeking a review of Judge Thomas Horan’s bench ruling approving the $190 million DIP facility. The appeal follows up on Lavvan’s initial DIP objection, and its filing of an adversary proceeding last week, alleging that its secured claim cannot be primed by prepetition lender Foris and DIP lender Euagore.
Lavvan counsel from Richards Layton & Finger argues that Foris, an entity under the control of Amyris board member/large shareholder John Doerr, exploited its position and leverage to maintain an originally $36 million priority position over Lavvan. Euagore is also an affiliate of Doerr.
The DIP was challenged by Lavvan due to its priming aspects, and Judge Horan overruled that objection with a bench opinion, but reserved the rights of Lavvan to challenge the order. The adversary proceeding action is a formal proceeding to modify the order to reflect that the underlying Foris loan that Lavvan was subordinated to no longer exists as a matter of law and that the Lavvan is a perfected non-subordinate and non-primed lien.
However, the appeal will be a slightly different legal posture as it will likely seek to have a federal court-level ruling on the underlying factual issues while the adversary proceeding will be limited to a modification of the DIP order.
Additionally, the White & Case-led ad hoc group of 1.5% convertible $690 million noteholders are seeking to compel discovery related to insider transactions and management decisions that occurred prior to Amyris’s bankruptcy filing. This group has recently added litigation counsel from MoloLamken, a firm that has previously represented convertible noteholders in Avaya and the debtor Revlon. A hearing on their motion to compel discovery is scheduled for Nov. 6.
LFI reported at the time of filing that the prepetition actions between Amyris and affiliates of John Doerr were prime target for activist creditors.
The sustainable materials company turned to chapter 11 reorganization to implement an operational and balance-sheet restructuring. Amyris aimed to run a dual-track chapter 11 process with a contingency to convert to liquidation should standalone or strategic options fail to materialize. Management envisioned a reorganized business focused on core research and development competencies after divestiture of consumer brands.
Under terms of the proposed DIP facility – funded by Euagore LLC, an affiliate of secured lender/Doerr VC fund Foris Ventures – the debtor is mandated to use the first month of the bankruptcy to engage major constituencies in plan negotiations while the consumer brands are marketed for sale. Furthermore, the DIP financing contemplates, subject to certain milestones, a 363 liquidation of the entire company, including its core of research and development, if such a reorganization is not achieved.
The DIP provides $190 million in new money for the administration of these cases through the end of 2023. The DIP financing priced at 12% creates a superpriority multi-draw senior secured term loan facility and a priming lien on all Foris’ prepetition secured interests.
Euagore, LLC adds to the growing list of deals and loans issued by Doerr-led entities. As such, Doerr is positioned to benefit from a return on the DIP investment, and his pre-petition secured positions could also make recoveries depending on how the reorganization plays out.
Foris Ventures and its affiliates – Perrera, Anesma, Anojo and Muirisic – provided Amyris with a series of loans leading to the bankruptcy filing in August. Muirisic LLC, a Foris Ventures affiliate, is the fund that supplied Amyris the $20 million loan one week before filing.
A series of secured loans the company received from affiliate companies of founder and significant shareholder John Doerr set up the legal dispute before the court today. The most recent deal the chairman inked with the company was a $20 million facility on August 2, one week before the company sought chapter 11 protection in Delaware.
Doerr’s venture capital fund Foris Ventures LLC is Amyris’ majority shareholder, and Doerr has served as Amyris chairman since 2006.
The company had $11.2 million in cash and cash equivalents at the end of the first quarter.
Jennifer Lappe, JD