I sincerely hope MNKD doesn't go bankrupt..
But, if they have to file bankruptcy, will it be 11 or 7? Correct me if I'm wrong. In chap 11, some (all?) of teh debt is forgiven, and they can come up with a reorg plan with financing. But, who will finance? Wont they lose both Danbury and Valencia? As it is, many Drs are saying incorrectly that MNKD is going out of business. If MNKD does go bankrupt, it would be fair to say that the chances of coming back are close to 0. Every thing will be on fire sale, and some pharma company (Chinese?) will buy them for pennies on dollar.
Chapter 7 is very easy. The company closes the doors, everything is auctioned off, and creditors are paid out of the auction fund according to their legal priority. Danbury will go to Deerfield Partners and Valencia will go to Sanofi under their respective UCC security agreements, and they become unsecured creditors for any deficiency (difference between the loan and value they get for the property). Creditors are paid pro rata according to their legal priorities; any remaining debt is discharged. The company dies.
Chapter 11 is way more complicated. The company continues to run, if it can, and the creditors battle it out in court. All cash in the company is collateral for creditor claims and cannot be spent without a court order. If the company spends money on salaries, that reduces the cash to pay creditors so the creditors have a right to object. The company will be in default to both Deerfield and Sanofi, and both the parties can make a motion to the court to take possession of their security for the purposes of auctioning it off, but the court would have to approve that motion. Valencia is no big deal, MNKD can rent a different office, but if Danbury goes the company is essentially out of business. So if Deerfield moves against their security the court will have to decide if MNKD has any chance of surviving long enough to file a reorg plan that the court can approve. The hurdle is that somebody has to put fresh cash into the company to keep it running during the time it takes for the reorganization plan to be created; salaries have to be paid, drugs have to be manufactured, and utilities have to be paid, and more money has to be available to exit bankruptcy.
<Crystal ball mode on> What will probably happen is that the court will order an auction of the assets that are not security for the debt. If some pharma company wants to buy Afrezza and/or TS, then they can cut a deal with Deerfield on the side, which suits Deerfield just fine because they really just want their money back and have no interest in owning Danbury. If nobody bids at auction, or the amount bid is very small, the court will authorize Deerfield and Sanofi to foreclose on their security. <Crystal ball mode off>
Chapter 11 is typically a consensual process where everybody tries to get as much as they can, but everybody knows going in that they are not going to recover 100%. The reorg plan might say that some pharma will put in $100 million for 80% of the assets, the creditors get 20%, and shareholders take nothing. Or the reorg plan could say the some pharma takes the intellectual property for $10 million and walks away, leaving the rest to be auctioned with the proceeds paid to creditors. Or the court could rule that there is not enough cash left to keep the company running while a reorg plan is finalized and the case is converted to Chapter 7 (see above). Or I can paint a hundred other scenarios so long as I am unencumbered by facts, all of them speculative.
The Mann Foundation is like anybody else. They can bid at auction (anybody reading this can bid too, just bring your checkbook) but will they? If they can buy the company cheaply and pay Deerfield just enough to go away (so they can keep Danbury) that might be in their interest, but then they (the foundation) would own the company 100%. I don't know what the trust indentures say, but do they really want to own the company and be responsible for turning it around, and can they legally deplete the fund assets for this purpose? I can't answer those questions; only the trustees can.
The court will likely not allow any shareholders not contributing "new money" to keep any share of the company unless the creditors are paid in full. The best economic result is for some pharma company to buy Afrezza and TS, let Deerfield and Sanofi take their security, and have somebody with a bit of cash bid for the rest of the company with the proceeds to pay off creditors according to their legal priority. Debt in excess of the available cash is discharged. However, that is a very complex transaction that would take $10-15 million up front to execute, but shareholders might recover something a year or two down the road depending how the deal is structured. Until then there would be no liquidity, and nothing to trade, but it wouldn't be a total wipe-out. However, somebody with cash might just buy it and keep it all for themselves, which they can do as well. Don't shoot the messenger, but in most scenarios the shareholders will get nothing. The company may die or it may live on, depending on the circumstances, but existing shares are typically cancelled.
No matter what happens, all of this will go down within about 100 days after filing. If somebody does have access to the necessary transaction financing, now is the time to get the ducks in a row because once the case starts the process will move very rapidly; the auction is typically conducted three weeks after the court orders it. Once the auction is over the assets are gone and there is no turning back. Bankruptcy auctions, except in very rare cases, are both final and non-appealable, and everything that happens from that point forward is a legal winding up of the company. Lawyers will argue over the scraps for a few months, but without the operating assets Mannkind as we know it will no longer exist. That is the likely reality, don't shoot the messenger.