Supplement company Natrol Inc. heads to bankruptcy court Wednesday in Wilmington, Del., to see if it can sway a judge to sign off on a creditor-payment plan that’s being held up by a disputed settlement.
Judge Brendan Shannon refused to approve the plan at a May 12 hearing, saying he had “a very bad feeling” about some things happening in the case. At issue is a settlement between Natrol’s current owner, Aurobindo Pharma
, and the former owner that sold it during the bankruptcy proceeding, Plethico Pharmaceuticals
Judge Shannon said the settlement, which would see Aurobindo get $23.3 million back of the $132.5 million it paid for Natrol, needed more scrutiny. The settlement would put to rest fraud allegations Aurobindo aimed at Plethico accusing the company of draining some $25 million out of Natrol through an allegedly fake construction contract.
Natrol’s sale brought in enough money to pay off all of the supplement company’s creditors, but until the payment plan gets approved, creditors are still waiting for their checks.
Complicating the situation is Plethico’s own insolvency proceeding in India. Bondholders that have been trying to collect their money say the proposed settlement runs afoul of an Indian court order that forbids Plethico from transferring its assets.