Leiner Health Products' recent settlement in the federal vitamin price-fixing litigation has reduced the company's outstanding indebtedness by more than $30 mil.

On Jan. 28, the private labeler received "settlements of approximately $30.8 mil. net of consulting and legal fees of $9.9 mil.," Leiner reports in a 10-Q filing with the Securities & Exchange Commission Feb. 14.

"The company made a mandatory prepayment of the loans outstanding in the amount of the net proceeds, which was applied pro rata to the outstanding principal amount of all loans and the cash collateralization of all letters of credit, with a corresponding reduction of each revolving loan commitment amount," Leiner reports.

Under the terms of Leiner's proposed financial restructuring, existing bank debt would be reorganized into two loans - a $195 mil. term A loan and a $48.2 mil. term B loan.

Those figures are lower than the original terms of the agreement in principle to restructure Leiner's bank debt. The original terms called for restructuring into a $200 mil. term A loan and a $79 mil. term B loan (¹ Also see "Leiner Chapter 11 Plan To Include New Capital, Credit, Debt Restructuring" - Pink Sheet, 12 November, 2001., p. 11).

The restructuring agreement calls for Leiner to make "mandatory prepayments equal to the net proceeds received from any antitrust litigation." The company's financial restructuring will be implemented through a prepackaged Chapter 11 bankruptcy reorganization plan, which is expected to be filed by Feb. 28 pending senior bank lender and bondholder approval.

For the fiscal third quarter ended Dec. 31, operating expenses fell 11.1% to $28 mil. "due primarily to lower advertising expenditures, reduced payroll spending and travel and entertainment related expenses" offset by financial and operational restructuring costs.

Operating loss for the quarter was $2.5 mil., down more than half from the $5.2 mil. loss incurred in the year-ago period. Net loss was $11.1 mil., up from $9.6 mil. last year, the firm reported.

Net sales in Q3 fell 8.2% to $146.4 mil. Domestic revenue declined 7.2% due to lower sales of branded herbal products, private label digestive aids, analgesics and cough/cold products. Leiner notes these decreases "were partially offset" by increased sales of private label vitamins and minerals and the introduction of the Nature's Origin line.

Leiner $30 Mil. Vitamin Price-Fixing Settlement Applied To Outstanding Debt

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