K-V Pharmaceutical to raise $32 million through private placement

K-V Pharmaceutical Company (NYSE:  KVa/KVb) (the "Company") today announced that it has entered into a definitive agreement with a group of institutional investors to raise approximately $32 million of gross proceeds from a private placement of 9,950,000 shares of its Class A Common Stock at $3.25 per share. The Company will use $20 million of the proceeds from the financing to repay certain outstanding amounts and other outstanding obligations under its credit agreement with U.S. Healthcare and the remainder for general corporate purposes, including the launch of Makena™. Subject to the satisfaction of customary closing conditions, the private placement is expected to close and fund on or about February 17, 2011.  

The Company also announced it has agreed to terms with US Healthcare I, L.L.C. and US Healthcare II, L.L.C., affiliates of New York based Centerbridge Partners, L.P. to close on a multi-draw financing facility with a total commitment of $130 million. The amendment is expected to be completed on or prior to February 18, 2011.  In addition, the Company has agreed to issue additional warrants to purchase 7,450,899 shares of the Company's Class A Common Stock, subject to completion of the private placement, at an exercise price of $1.62 per share.

Upon completion of the definitive agreement, the loan terms and covenants will be amended to reflect the Company's current projections and timing of certain anticipated future events, including the planned disposition of certain assets.  The significant components of the amended agreement will include extending the $60 million payment that was due on March 20, 2011 to three payments of $20 million each with the first payment due upon closing and funding the private placement, $20 million due in April 2011 and $20 million due in August 2011.  In addition, all past covenant issues will be waived.  In addition to the loan balance which remains outstanding today, future draws against the facility, subject to achievement of certain Makena™ related milestones, are anticipated to be $15 million in March 2011, $15 million in May 2011 and $10 million in each of July, August, September and October 2011.   A more complete summary of the amendment is attached to this press release.

The shares of Class A Common Stock sold in the private placement have not been registered under the Securities Act of 1933, as amended, or state securities laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or an applicable exemption from the registration requirements. The Company has agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the common stock sold in the private placement.

Jefferies & Company, Inc. acted as sole placement agent on the private placement. Jefferies & Company, Inc. and Alvarez & Marsal advised the Company with respect to the restructuring of the Senior Secured Facility.