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Contract Research Solutions, Inc. and Several Affiliates File for Chapter 11 Protection
On March 26, 2012, Contract Research Solutions, Inc. (“CRS”) and several affiliates (collectively, the “Debtors”), including its Canadian subsidiaries, filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware. The petition lists assets between $1 million and $10 million, lists liabilities between $100 million and $500 million, and estimates the number of creditors in the range of 5,001 to 10,000.
The first-day declaration (the “Declaration”) of Michael T. Murren, the Chief Financial Officer of CRS and one of CRS’s affiliates, asserts that the Debtors have “negotiated and executed (a) a definitive postpetition financing agreement, thus ensuring liquidity during the Chapter 11 Cases, (b) a fully-baked sale process supported by the prepetition secured lenders and subject to higher or otherwise better bids in a competitive, market-tested auction, and (c) a comprehensive plan support agreement and wind-down strategy that is intended to satisfy administrative claimants and priority unsecured claimants pursuant to a chapter 11 plan, notwithstanding [the Debtors’] significant prepetition secured obligations.”
|The Declaration further states that the Debtors are headquartered in Cary, North Carolina, and are the leading provider of early phase clinical research services as a contract research organization providing testing services for name-brand pharmaceutical and generic drug companies. The tests run by the Debtors, according to the Declaration, are then utilized in reporting to the Food and Drug Administration (the “FDA”) by such pharmaceutical and drug companies. The Debtors have approximately $185 million in funded indebtedness comprised of the debts listed on page 6 of the Declaration.
According to the Declaration, the inaccurate date and time data entered by six research chemists at the Debtors’ Houston, Texas bioanalytical laboratory, purportedly to obtain additional compensation through weekend pay and for hours the chemists did not work, led to the Debtors hiring an independent third party, Bioclinical Research Solutions to investigate the allegations, developing and implementing a corrective preventative action plan, engaging in discussions with the FDA regarding the accuracy of certain trials conducted in the Houston laboratory between April 2005 and June 2010, engaging in a rework of certain studies conducted from April 1, 2005 to February 28, 2008, and to severe constraints on the Debtors’ liquidity position. The Debtors subsequently exited a leased facility, reduced workforce, and engaged in a marketing process which resulted in the Prepetition First Lien Lenders agreeing to provide debtor-in-possession financing the fund the Chapter 11 Cases, allow for the Debtors to conduct an appropriate marketing process postpetition, provide for a wind-down of the estates, and offer a bid higher than the other bidder through a credit bid.
The case has been assigned to Judge Kevin J. Carey and is being administered under Case Number 12-11004.