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Nuvectra Corp. (NVTRQ) - To the moon, to zero, or somewhere in between

1/19/2020

51 Comments

 
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Nuvectra Corp. (NVTRQ) commenced Chpt. 11 bankruptcy proceedings on November 12th 2019. The share price took a nose dive from $1.39 to $0.22, since then it's been trading in the $0.10-0.20 range.

Upon first glance it looks like game over for the common, but sometimes looks can be deceiving. 

Let's take a step back in time.

In March 2016 Integer (Formerly Greatbatch) spun off  QiG Group LLC which converted into Nuvectra Corp shortly before the completion of the spin-off. Nuvectra became a  publicly listed medical device company and it's common stock was floated on the Nasdaq under the ticker NVTR. You can read about the spin-off here.

As part of the spin-off Nuvectra received some intellectual property for use in the development of medical devices for the treatment of neurological disorders and chronic pain. NVTR's primary product for development was Algovita,  an FDA approved implantable medical device utilizing a spinal cord stimulation (SCS) system for the treatment of  chronic pain of the trunk and limbs.

Unfortunately the spin-off agreement meant Nevectra was  tied  into a 5 year manufacturing contract with Integer which resulted in poor margins for the  Algovita product.

Despite the fact that the Algovita product was doing  around $47 Mil in annual revenue  and growing, it was unprofitable and Nuvectra ran into problems. The gross margin on Algovita was below the industry standard for such products but Nuvectra's hands were tied. Sales weren't the problem, profits were.

​Losses began to mount and  in August 2019 Nuvectra  announced
it was "exploring strategic options to enhance shareholder value".  The situation didn't improve , losses continued and the share price  began to fall.  As November rolled around the Chpt 11 proceedings were announced    and the bottom fell out of the stock.

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Nuvectra's stock was de-listed from the Nasdaq and it began trading on the OTC markets under the ticker NVTRQ (the Q denotes that the firm has entered bankruptcy proceedings).

Some readers will be aware that in virtually all bankruptcies the common becomes worthless since it sits at the bottom of the cap stack. There is rarely anything left for shareholders once the secured/unsecured creditors, lawyers and bankers have received their  portion of the  liquidated assets.

And yet, NVTRQ hasn't gone to zero, volume has dropped off since the heavy selling on the bankruptcy announcement  subsided. The share price has been bouncing around  between the $0.10-0.20 range and shares are still  being traded. Why?

Me and a fellow investor have been looking through the Q tickers for the last few months and NVTRQ came on the radar, we didn't dig too deep  and moved onto the next one. A few  weeks passed and I was contacted by another investor who had examined the bankruptcy  in  closer detail uncovering some interesting things. At this point I 'd like to extend my thanks to @FBuschek for all his work on NVTRQ. I recommend you all follow him on twitter and ask him to start a value blog! :)


For those of you who don't know, the public can pull up the court docket for a bankruptcy and read through the filings. You can find the docket for the NVTRQ case here.

​Okay, here's where it gets interesting.

Rather than opting for a Chpt. 7 bankruptcy where the company is shut down and all the assets are sold off Nuvectra  has gone down the Chpt. 11 route instead.

Chpt. 11 gives a company time to  reorganize it's  business affairs and  restructure it's debts. It can opt to sell some of its assets or the whole company as a going concern.  As part of the bankruptcy  Nuvectra is legally obliged to file a monthly financial report.

Let's take a look at the balance from the most recent  report which you can find here.

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As you can see , according to the last available filing NVTRQ had total assets of $32,457,881 and total liabilities of $21,794,196.  

BV stands at $10,663,685 vs a Market Cap of $3.22 Mil.

Now obviously the argument  can correctly be made that certain assets must be heavily marked down in a bankruptcy since it is a distressed situation.   This is correct but in this instance it is not the focus. This investment thesis hinges upon something else.


What the balance sheet doesn't capture is the potential value of Nuvectra's I.P. pertaining to it's two products, the FDA approved Algovita and pre FDA approved Virtis.

An FDA decision for Virtis is due in H1 2020 so it's value is limited at the present time.

Algovita is an FDA/CE approved product which has been implanted into 5,000 patients, prior to bankruptcy it achieved annual revenue of $25 Mil in FY 2017 and $47 Mil in  FY 2018. What would a potential bidder pay for that?

1x, 2x,  3x or 4x Rev?

To further bolster the case for the value of Algovita on Dec 31st it received another FDA approval ;


"On December 31, 2019, the U.S. Food and Drug Administration (the “FDA”) granted full-body magnetic resonance (MR)-conditional approval for the Company’s Algovita® spinal cord stimulation product. The approval was granted following the FDA’s 180-day review process with respect to the Company’s previously announced regulatory submission in June 2019."

Prior to the bankruptcy Nuvectra had racked up an accumulated deficit of around $150 Mil. If the company sells some of it's assets such as Algovita and continues as a going concern it will have a sizable amount of NOL carry-forwards to utilize too.


The plot thickens!


Nuvectra is now moving forward with a  stalking horse bid  process.

For those who don't know, a stalking horse bid process  involves a  bidder being selected, they are then invited to table an initial bid which acts as a price floor for an asset or group of assets to be auctioned off. As part of the deal,  if the  primary bidder is outbid   they get a compensation fee, usually around 3% of the transaction cost.

The latest 8-K notes the following;


"The Company may select a Qualified Bid as a “stalking horse” bid. The Order provides that if a stalking horse bidder executes a purchase agreement on or before February 7, 2020, the stalking horse bidder is entitled to receive deal protections consisting of (i) reimbursement of reasonable out-of-pocket expenses, subject to an aggregate cap of $250,000, and (ii) payment of a break-up fee equal to 3.0% of the cash purchase price set forth in the stalking horse bidder’s Qualified Bid."

The stalking horse bid process is good for the bankruptcy estate and the creditors as it ensures that the assets aren't just sold off at fire-sale prices.

Prior to the Bankruptcy there were around 45 potential bidders who  had expressed an interest when Nuvectra announced it was exploring  strategic alternatives in August 2019. 


Post bankruptcy this number has increased to around   60 interested parties;

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Whilst I was finishing my buying spree news came through that the court had approved the sale and stalking horse bidding process.   Here's the timeline for the sale.

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The Order approving the bid and auction procedures also notes the following;

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The important part in the above except is   "the sale of Assets free and clear of all liens, claims, and encumbrances..."


 ​So, things are moving fast here.

Feb 7th is the deadline for selecting the Stalking Horse Bidder.

Feb 24th is the deadline by which all bidders have to submit a bid.

An auction is held on the 27th and the whole deal closes by March 19th assuming no objections.

There's the possibility of some 'cure costs' depending on how the executory contract plays out.  The bidder can choose to buy certain assets or  just buy NVTRQ outright as a going concern. The break down for the possible cure costs  can be seen here.  If the buyer just keeps all the contracts in place then the cure costs are minimal, those that aren't retained by the buyer must be 'cured' by the debtor.

The largest portion of the  $2.86 Mil pertains to the employment contracts of the CEO and CFO,  around  $2.18 Mil. If they are kept on cure costs are negligible. Assuming NVTRQ fetches a decent price for it's assets   then it's no major issue if it  ends up on the hook for all the costs.

The other costs to consider are those of the lawyers and bankers overseeing the proceedings. You'll see them listed on the balance sheet  in the post-petition liabilities section  and labelled 'professional fees'. The above report is on an accrual basis so those aren't the final costs. 

Below is the professional fee budget schedule. Bear in mind this is a just a projection though, the fees can and commonly do overrun this. Thus far there's an overrun of around $200k which is  negligible. The total projected cost  is around 3.5 Mil but given the overrun I'd add another $1 Mil to that.

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This investment doesn't succeed or fail based on professional fees and cure costs though, it's all about the I.P. for the two products. 


I have no idea how to value this as it all comes down to what a bidder is willing to pay for Algovita, Vertis or the whole business.


Maybe it's $25 Mil, maybe $50 Mil, maybe even $100 Mil. Your guess is as good as mine.

Medtronic, Stryker, Abbott and the other big players have a lot of cash to deploy. If a bidding war gets underway then the sky is the limit.

​One thing I'm pretty sure of is that it is probably going to be a lot more than the current market cap of $3.22 Mil. I can't say for sure though. 


​What are the risks here?

The first one is the fact that you're reading a blog post about a bankruptcy case written by some random guy on the internet, I'm not a bankruptcy lawyer, I've never taken any law classes, I'm just a guy who's read through the court docket, checked the financials and looked up the definition   of some legal terms.

Don't invest based on what I'm saying, I could be dead wrong here.

The second risk is that a deal gets done but the winning bid isn't large enough to cover the liabilities and costs, the common ends up with nothing.


The third risk is that the deal plays out but somehow the common gets screwed in the process. Maybe insiders cut a deal that massively dilutes minority shareholders, there's always a chance.

​The fourth risk is that the deal ends up falling through, NVTRQ has to honor all it's liabilities to it's creditors including any lawyers/bankers fees and the rest. It moves into Chpt. 7 and   sells off it's remaining  assets at fire-sale prices. The common is left with nothing.


And so it is.  To the moon, to zero, or somewhere in between.

Let's find out which.


David.


Long NVTRQ
51 Comments
Dan
1/19/2020 02:56:03 pm

An interesting situation where NOLs are involved is (US listed) $MACK. They have biotech milestone rights for ~12x the current stock price (including net cash on hand). Obviously the probability is not incredible that the milestones will be met but the downside may be protected by NOL carryforwards potentially worth more than $4. So if the milestones don't pay out I imagine an effort will be used to pursue usage of the NOLs. The company is controlled by activists so I do believe that either a high percentage milestone payout or NOL usage situation or both.

Because it is Not trading currently for less than net cash. There is temporary downside of at least 40% if the milestones suddenly are announced as being worthless. So obviously tons of short term risk. An awkward Pabrai coin toss where you might be down by half on the position for several years before making the money back but a Pabrai coin toss nonetheless.

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David
1/19/2020 03:37:31 pm

Thanks Dan,

I'll take a look.

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Jeff link
2/8/2020 04:16:34 pm

When you say the company is controlled by "activists", do you mean like radical liberal socialists? Stable management is the foundation of any successful company for my strategy.

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Dan
2/8/2020 04:18:49 pm

Activist investors.

Valuecat
1/19/2020 03:14:39 pm

Strangest bankruptcy I’ve seen. Who takes 45mm in cash and pays off the banks immediately in exchange for nothing?
Who schedules an auction before the FDA even has a chance to approve Virtis?

Not just a margin problem. There was an issue with patient difficulty using the product.

Why no equity committee with all these big possible values put out there? They tried to sell company for a year and nothing happened.

Mgt. owns No stock. Who is looking out for us?

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David
1/19/2020 03:49:27 pm

Hi Valuecat,

Yes, this is certainly a strange situation indeed.

You raise some valid points.

There's some speculation that one or more of the pre BK bidders asked NVTRQ to go the Chpt 11. route so they could get out of or renegotiate the Integer contract.

Mgt. owns very little stock so they probably don't care about waiting for FDA approval for Virtis, they'll get a nice golden parachute.

Yes, the lack of equity committee is a concern for sure.

I read about some of the patient issues with Algovita on the Medtechy board, despite that they were managing to sell product, not only that but it's seems the alternatives have their own associated problems too. Maybe one of the big players buys it and then puts in some more money to fix the issues. Who knows?

This one is so hard to judge, high uncertainty, high upside and downside potential.

Not long till we find out!

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Tom
1/19/2020 04:43:30 pm

Why does management not hold? If prospects were good, you'd see management buying.

David
1/19/2020 05:06:27 pm

Hi Tom,

The current management in place are fairly new, the last group sold out as the ship was sinking. No insiders would be interested in buying as the share price was cratering.

I think the current management are prohibited from buying shares whilst the firm is in Chpt 11. They'll come out of this well anyway, either they get to keep their job or they get a big golden parachute.

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Frank
1/20/2020 12:23:43 am

Hello. Thanks for the article.

Is it correct Information that Michael Burry is owning this stock?

https://www.gurufocus.com/news/1000202/michael-burrys-top-5-holdings

How do you comment his ownership?

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Valuecat
1/20/2020 01:40:58 am

It is not known if he owns it now. Year end holdings of institutions will come out by Feb 15. If Scion owned back in September, he got bagged like everyone else. So, not really relevant, unless he doubled down after bankruptcy.

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Dan
1/20/2020 02:43:22 am

So where do you guys come out sizing a position such as this, or situations such as AFFY or MYRX? Or other situations with high expected value but with decent probability (or non-zero probability) of being worthless?

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Chris
1/30/2020 12:14:45 am

This is the question. Generally I dump these into the "too hard" pile but maybe the approach with this and the Couchman NOLs is to buy them as a basket totaling one's standard position size??

Thoughts anyone??

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wabuffo
1/20/2020 03:44:38 pm

Interesting idea - but there is a big watchout when dealing with Chapter 11 cases. Even if a sale is successful, the Court has not begun to adjudicate claims. Before a POR (Plan of Reorganization) can be filed, the Court will have to set a bar date for filing claims. I guarantee you that there are going to be more potential claims than are currently showing up in pre-petition liabilities.

Take a gander at Court Docket filing no. 93 - Schedule E/F - Non-priority unsecured claims. There are several litigation claims with UNDETERMINED VALUE as well an inventory commitment to INTEGER that is also of UNDETERMINED VALUE. This list is not an official claims register and many of these claimants will probably file claims that could be bigger than what Nuvetra has on its books.

The other area to pay attention to is Schedule G - Executory Contracts and Unexpired Leases. Everything listed here is UNDETERMINED, but you can bet that there will be a lot of claims potentially filed from this list.

The point is that pre-petition liabilities will likely grow in value AND the Debtors will have to challenge everything that is filed that they believe is not a true claim. This has a tendency to stretch out the Chapter 11 for months (if not years) beyond any asset sale and tends to siphon cash from the estate due to the monthly costs of running a Chapter 11 case.

Something one should factor into the waterfall recovery chart for valuing the different classes in the bankruptcy case.

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David
1/20/2020 08:40:39 pm

Hi wabuffo,

You raise some good points. This is such a high uncertainty situation. Maybe NVTR get's bought out completely, maybe the winning bid is high enough to cover the undetermined claims. Maybe the share pops on the news of a sale of assets then drops once it emerges NVTR will be locked in litigation and the cash will be burned away. Who knows what will happen, high uncertainty, high upside potential, high potential of going to zero. We'll find out pretty soon!

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Harry link
1/21/2020 04:34:16 pm

There's been some interest expressed by the DoJ in forming an equity committee. If you hold shares of NVTRQ, ping me at harry@tenquant.io and I'll connect you with them.

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Donald
1/21/2020 09:32:10 pm

My research synopsis:

Over 70% institution owned still and these insiders holding shares going into 11.

KOSHAREK JENNIFER 57,234
BIHL ANTHONY P III 29,426
CHAVEZ CHRISTOPHER G. 1,937
HAWARI KENNETH G 45,987
JOHNSON DAVID D 61,987
SONG JANE 1,937
TREMMEL JON T 23,205
ZELIBOR THOMAS EDWARD 12,987
TRANCHINA BENJAMIN 76,334
HANCHIN JOSEPH PAUL 45,377
BERGER WALTER Z 107,135
PARKS FRED B 10,050
MILLER JOSEPH A 60,106
DREES SCOTT F 221,344
KAULA NORBERT 13,326I

This company was spun off for $75,000,000 before FDA/CE for Alovita or VIRTIS was even a thought. In 2019 this company had a valuation in excess of $300,000,000.

VIRTIS even without FDA Approval is worth $ and a company like Medtronic has the $, market and talent to take down AXONICS which is better currently than VIRTIS
They have eliminated the Integer Manufacturing contract which creates the opportunity to renegotiate or manufacture the device independently.
This is in Federal Bankruptcy Court so share structure is not changing.t
The pps will drift up heading too stalking horse bidder imo $150,000,000 valuationmin
The patent on the Algovita paddle is worth at least a $1,000,000
The acquiring gets years of development for a $2,000,000,000 industry.

glta. Long here


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T
1/22/2020 08:40:15 am

Just posting so I get notifications for new comments.

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Rick Pierson link
1/22/2020 08:58:03 pm

Harry, Please add me. Thanks!

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Christopher Hampton
1/23/2020 11:09:47 pm

I have been in touch with the DOJ regarding the formation of an equity committee--and they were promptly responsive. I would encourage shareholders to reach out and protect the value of your investment.

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John
1/29/2020 12:03:44 am

So I am new to all of this but I hold a substantial number of shares that were obtained for very low prices. What exactly is the function of this equity committee? I have read all of this documentation and like some others, I don't really understand the reasons for the bankruptcy filing unless it was due to those unfavorable manufacturing contracts. I want to do everything that I can to maximized the value of what I currently hold, so I am monitoring this very closely. Thanks!

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Christopher Hampton
1/30/2020 08:14:15 am

The equity committee represents the interests of the shareholders, and protects those interests. with an equity committee in place i would consider this a low-risk, high-return investment.

My understanding is that, yes, the purpose of the BK was to get out from under the supply contract with Greatbatch/Integer.

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Flame
1/30/2020 03:29:03 am

Nvtr has more than 350 patents with 0 value in the asset amount. There are a lot of dark secrets within nvtr.

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S
1/30/2020 08:37:34 pm

The patent issue is also something that should be raised by an equity committee.

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Peter
1/30/2020 07:08:07 pm

Anyone know what's going on? It just dropped 27%.

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Ric
1/30/2020 07:17:18 pm

NVTRQ just filed its BK plan which states that equity will be wiped out -- no distributions. Not sure if that's just a placeholder plan to keep deadlines tight or what.

The other thing to keep in mind on the liability piece is what additional money is due to SVB, the secured creditor. The remaining balance is $10M, but SVB certainly has "make-whole" claims involving fees, accelerated interest, etc. The plan docs acknowledge as much.

Often, those "make-whole" amounts get wiped out too, but in the case of a "solvent" debtor, which by definition would exist with any potential shareholder recovery, the make-whole $$$ can be sizable and collectible. See the issues involving PG&E and Ultra Petroleum (in the 5th Circuit) for examples.

Thus exhausts my hazy knowledge of solvent-debtor make-whole issues.

Anyone with further thoughts on that one is encouraged to chime in!

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Interested Party link
1/30/2020 09:03:08 pm

Ric can you provide a link to the document that says Equity interests are wiped out? I don't doubt you I'm just wondering if you heard that shareholders get nothing or are 100% certain and actually read it for yourself? I cannot find a new report filed today either. There were a couple dated yesterday.

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S
1/30/2020 09:12:01 pm

http://www.kccllc.net/nuvectra/document/list/5044

Plan of Liquidation filed 1/29/20

S
1/30/2020 08:35:02 pm

I just read the filing. It appears the company is trying to pull a fast one with the secured creditors.
All is not set in stone, however -- look at bottom of pg 34 re: Modification of Plan.

Valuecat is correct -- there really needs to be an equity committee sooner than later to protect shareholder interests before the bids come in. I can't imagine any tutes still in would allow this to go forward like this without a say, but maybe they're not paying attention or have written it off.

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Christopher Hampton
1/31/2020 02:32:06 pm

This is why we needed an equity committee

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Christopher Hampton
1/31/2020 04:37:16 pm

or "need' an equity committee i should say. I doubt the court will approve this plan, and it does not address where excess recovery would go. They do specifically say that no debtor can receive more than 100% of what they are owed.

I don't think yesterday's releases materially change the prospects for shareholders.

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Christopher Hampton
1/31/2020 08:07:14 pm

...although we did get several pieces of new information. For instance that Stout has "directly interfaced with several additional parties that have expressed interest in acquiring the debtor's assets.'

Ric
2/1/2020 12:38:34 am

So now I'm getting confused.

My first thought on the plan yesterday was it's merely a placeholder -- there are no dates, numbers, figures, or estimated class recoveries (nor could there be before auction results). It's simply a way to keep the timeline/deadline train running, so confirmation can proceed apace with the cash plan.

But NOW they've filed this afternoon (available on the KCC website) a motion to approve the disclosure statement and a shortening motion to hold DS approval hearing on Tuesday March 3, 2020 -- lest they breach the cash collateral order (Docket #146 Paragraph 13(k)(iv)).

So here is the proposed schedule:
Thursday 2/27/20: Auction held

Friday 2/28/20: Literally ONE business day to:
-Report auction results
-Amend plan and DS accordingly
-Make all objections to said amended plan
-Respond to such objections

Monday 3/2/20: Hearing to approve DS

How exactly is that schedule going to work?? And if they miss the 3/3/20 DS approval deadline, then SVB can seize all inventory and financial assets as an Event of Default? (See id. Paragraph 14).

I guess this proposed schedule isn't exactly *inconsistent* with the idea that yesterday's plan is a placeholder meant to ensure the timeline/deadline train keeps moving...but the way this is ostensibly set to play out at the end of February seems...weird.

Maybe this is all to avoid having to take out some DIP money. Maybe it doesn't matter if the auction result is generous enough. Maybe this is some sweetheart for the secured SVB lender and everyone else gets it good and hard. But the fishiness scale went up a notch this afternoon.

Full disclosure: Long NVTRQ, even interested in possibly acquiring some more at a cheap enough price...but now...getting sort of suspicious about management. (Yeah yeah, I know, welcome to the club.)

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S
2/4/2020 05:51:01 pm

from the yahoo message board:
https://finance.yahoo.com/quote/NVTRQ/community?p=NVTRQ&.tsrc=fin-srch

For all NVTRQ Shareholders - Equity Committee Formed - Please share ASAP

Rest assured the DOJ is watching and monitoring the Nuvectra Ch 11 process very closely. I have been corresponding with the DOJ in the last several days.They have received a lot of emails and inquiries from Nuvectra common stockholders about the NVTRQ Ch 11 process. They will make sure that the process is handled correctly.

The DOJ has recommended that common stockholders petition the court directly to request the court puts an Equity Committee in place to protect our equity interests. Below is a link to the BR website where there is an online form to communicate with the BR court and ask questions about the process. It will take you only a couple of minutes to fill out the form. In the Inquiry box just state that you, as a stockholder, are requesting that an Equity Committee be put in place to protect the equity Interests of all Common Stock Shareholders. I suggest that everyone go to the form right now and fill it out ASAP. Please share this with everyone.

http://www.kccllc.net/nuvectra/inquiry

This is what the form looks like and how I filled out the form:

Full Name:
Organization: Common Stock Shareholder
Street Address 1:
Street Address 2:
City:
State:
Zip:
Country: US
Email address:
Phone:
Fax:
Relationship to Debtor: NVTRQ Common Stock Shareholder - XXX,XXX shares
Inquiry:
As a NVTRQ Common Stock Shareholder holding XXX,XXX shares I am requesting that the court put in place an Equity Committee to protect all NVTRQ common stock shareholders equity interests in NVTRQ. I am asking that the Equity Committee insures that any and all excess sale proceeds, after paying court approved debtors, be paid as a distribution equally to all NVTRQ common stockholders. Please respond to confirm receipt and to inform regarding status of the Equity Committee. Thank You.

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Jon
2/6/2020 09:40:37 pm

Done! Thanks for providing the template, hopefully they get enough responses.

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Peter Orlicki
2/5/2020 02:55:58 pm

Ok. Now it's up 55%. What happened this morning?

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Jon
2/7/2020 08:35:51 pm

Hi all, does anyone know when and where we will find out about the stalking horse bid from today, if there is one. What places may report on this or where is a good place to go digging for info? It’s an intriguing case for sure!

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Valuecat
2/7/2020 08:46:51 pm

Hoping it will be made known.

But don’t know. Need an equity committee to keep this process honest.

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Christopher Hampton
2/7/2020 08:54:43 pm

I think company mgmt is doing its best to discourage shareholders. And that will include not naming a stalking horse today.

I don't know if this is from a lack of concern, or because they are interested in driving out the current group of shareholders. however from the fiasco with the proposal for liquidation, I do suspect the latter.

Jon
2/14/2020 03:44:49 pm

Hi guys, so looks like either no stalking horse bid or it’s not been made public.
What’s the process for the auction, is it something made public while happening, can shareholders listen in/attend?
Also did anyone hear back about the formation of an equity committee. I filled out the form but didn’t get any reply or confirmation.
Very interesting to follow, but hard to get info!

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Valuecat
2/14/2020 03:50:39 pm

Ghosted

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Christopher Hampton
2/14/2020 04:18:58 pm

Lol, Elementary's thesis of "to the moon, or zero" still stands. I'm not so sure we have had any new info since the new year that impacts the likelihood of the outcome.

I have not heard any more about the equity committee (though I did get an email with confirmation and a few questions back). Can't hurt to email again...

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Curt
2/15/2020 02:45:18 am

From the "Objection of Official Committe of Unsecured Creditors to Debtor's Motion of Interim and Final Orders"

..."the Debtor unfortunately did not receive a stalking horse
bid..."

"Inexplicably, however, on the Petition Date, the Debtor made a $35 million prepayment (of a $45 million balance) to its pre-petition lenders Oxford Finance LLC and Silicon Valley Bank (the "Lenders") leaving the Debtor with only approximately $7.1 million in cash (after certain other payments)."

"Indeed, even after taking $35 million in cash on the Petition Date, the Lenders are trying to abscond what little value is left in the estate. For example, despite the fact that the Lenders do not have a pre-petition lien on intellectual property (“IP”), under the Proposed
Final Order, the Lenders receive a lien on IP and all other unencumbered assets..."

http://www.kccllc.net/nuvectra/document/1943090200214000000000001

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S
2/18/2020 03:37:56 pm

Good to see someone's wise to the game being played here.

Why would a company file for bankruptcy protection,
then give away 75% of their cash to the secured lender,
then hold an auction before knowing the status of the forthcoming FDA approval of one of their IPs (Virtis) because they're low on cash,
while the secured lender is petitioning for a piece of the IP?

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Valuecat
2/18/2020 03:42:25 pm

No explanation ever given.
It just reeks.

Peter
3/2/2020 06:51:57 pm

Does anyone know the outcome of the auction? How does it affect us?

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David
3/2/2020 06:57:26 pm

Hi Peter,

The successful bidder is Cirtec Medical which are a PE backed private firm and the back-up bidder is Boston Scientific. You can read the court document of the announcement here;

http://www.kccllc.net/nuvectra/document/1943090200228000000000008


The amount of the winning bid has not been announced yet, I presume because the paper work on the deal is being done. Until we find out the size of the winning bid it's impossible to know whether the common has any value or not.

Not long to wait now.

Regards,

David

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Curt
3/3/2020 12:05:55 am

The Unsecured Creditors Committee is petitioning to postpone the Sale Motion for a reasonable period of time to allow the parties to determine whether the Sale is truly in the best interests of the Estate.

"Unfortunately, the Debtor is still waiting for FDA approval of the Virtis product (though, upon information and belief, the Debtor remains hopeful to receive it soon). Without such approval, the sale price paid at the auction was much lower than would otherwise likely be obtained if the Debtor had received such approval."

"Given the extremely underwhelming sale results, the hearing to approve the sale should be postponed for a reasonable period of time, subject to the Court’s availability, to allow the FDA to complete its review of the Debtor’s Virtis produce so that parties can determine whether the Sale is truly in the best interests of the estate."

http://www.kccllc.net/nuvectra/document/1943090200302000000000006

Reply
S
3/3/2020 03:09:26 pm

Page 11 of this document
http://www.kccllc.net/nuvectra/document/1943090200302000000000009

E. TheSale
30. Due to the Debtor’s extremely limited liquidity, the Debtor was left with no choice but to run a truncated sale process pursuant to various onerous milestones.17
31. Unfortunately, while the Debtor hoped to obtain FDA approval of the Virtis product prior to the conclusion of the sale (the “Sale”), the FDA has not yet responded.
32. Predictably, the Sale was not very successful, and the winning bidder is buying, among other things, the Debtor’s IP, inventory, and equipment for just $2.3 million.18
33. Upon information and belief, had the Debtor delayed the Sale until after receiving FDA approval of its Virtis product, bidders would have been willing to pay millions (indeed, perhaps tens of millions) of dollars more for the IP.

And the CTO of the winning bidder Cirtec used to be CTO of Nuvectra
https://www.linkedin.com/in/norbert-kaula-820231158
http://archive.is/wip/pzFUE

Only bright spot is that it appears the lawyers for the unsecured creditors are well aware of what's going on.
The DOJ should really get involved in this.
Failing business with poor quality assets is one thing, total thievery is another.

Reply
Curt
3/3/2020 03:02:03 pm

Motion by Unsecured Creditors Committee for Derivative Standing to prosecute Estate Claims against the Pre-Petition Lenders.

"the winning bidder is buying, among other things, the Debtor’s IP, inventory, and equipment for just $2.3 million."

"Upon information and belief, had the Debtor delayed the Sale until after receiving FDA approval of its Virtis product, bidders would have been willing to pay millions (indeed, perhaps tens of millions) of dollars more for the IP."

http://www.kccllc.net/nuvectra/document/1943090200302000000000009

Reply
Steve Kilsdonk
4/3/2020 01:05:06 am

Posting only to trigger future notifications.

Reply
Randy
8/3/2020 11:57:42 am

Anyone know the latest on NVTRQ? thx much

Reply



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