8-K: VBI Vaccines Provides Update on Restructuring, Announces Partial Revocation Order

VBI Vaccines has provided an update on its restructuring proceedings, including a partial revocation order from the British Columbia Securities Commission to facilitate a transaction with K2 VBI Equity Trust.

Summary

• VBI Vaccines is undergoing restructuring proceedings initiated on July 30, 2024, under the Companies' Creditors Arrangement Act (Canada).
• An acquisition agreement was entered into on October 24, 2024, with K2 VBI Equity Trust, an affiliate of K2 HealthVentures, a secured creditor.
• The purchaser will acquire substantially all assets of VBI and its subsidiaries, with existing equity interests being cancelled for no consideration.
• New common shares will be issued to the purchaser in exchange for releasing VBI from its debt obligations.
• Certain assets and liabilities will be vested in newly-incorporated special purpose vehicles.
• The transaction was approved by the Ontario Superior Court of Justice on October 31, 2024, and recognized in the US on November 20, 2024.
• The closing of the transaction is expected by the end of 2024.
• The British Columbia Securities Commission issued a partial revocation order on December 9, 2024, allowing the transaction to proceed.
• The company failed to file its interim financial statements for the three and six months ended June 30, 2024, due to financial distress.

Sentiment

Score: 2

Explanation: The document indicates a negative outcome for existing shareholders, with the company undergoing a restructuring process and existing equity being cancelled for no consideration. The company also failed to file its interim financial statements due to financial distress.

Positives

• The partial revocation order from the British Columbia Securities Commission allows the restructuring transaction to proceed.
• The acquisition by K2 VBI Equity Trust provides a path forward for the company's assets and operations.
• The restructuring process is moving towards completion with a target closing by the end of 2024.

Negatives

• Existing equity holders will receive no consideration for their shares.
• The company failed to file its interim financial statements due to financial distress.
• The company is undergoing a restructuring process under the Companies' Creditors Arrangement Act (Canada).
• The company's shares will be delisted from the OTC Markets.

Risks

• The transaction is subject to the satisfaction or waiver of closing conditions.
• The ResidualCos will be liquidated and wound-up by way of bankruptcy proceedings.
• The company will apply to cease to be a reporting issuer in Canada after the transaction is complete.
• There is a risk of further delays or complications in the restructuring process.

Future Outlook

The closing of the transaction is expected to occur in the near term, by the end of 2024. Following completion of the Transaction, the Company intends to apply for a full revocation of the FFCTO and a cease to be a reporting issuer order in each of the jurisdictions of Canada in which the Issuer is a reporting issuer.

Industry Context

The restructuring of VBI Vaccines reflects the challenges faced by some biotechnology companies in securing funding and achieving commercial success. The acquisition by a secured creditor is a common outcome in such situations.

Comparison to Industry Standards

• The restructuring process is similar to other biotech companies facing financial difficulties, such as those that have filed for Chapter 11 bankruptcy in the US.
• The use of a reverse vesting order is a common mechanism in Canadian restructuring proceedings.
• The involvement of a court-appointed monitor is standard practice in such cases.
• The cancellation of existing equity for no consideration is a typical outcome for shareholders in a restructuring where secured creditors take control.

Stakeholder Impact

• Existing shareholders will lose their investment as their shares will be cancelled for no consideration.
• Creditors, particularly K2 HealthVentures, will gain control of the company's assets.
• Employees may experience uncertainty during the restructuring process.
• Customers and suppliers may be impacted by the changes in ownership and operations.

Next Steps

• The closing of the transaction is expected by the end of 2024.
• The company will apply for a full revocation of the FFCTO.
• The company will apply to cease to be a reporting issuer in Canada.
• The ResidualCos will be liquidated and wound-up by way of bankruptcy proceedings.

Key Dates

Keywords

restructuring, acquisition, bankruptcy, VBI Vaccines, K2 HealthVentures, partial revocation order, Companies' Creditors Arrangement Act, debtor-in-possession financing, FFCTO, financial distress