Angiotech to continue implementation of previously announced recapitalization transaction under CCAA

Angiotech Pharmaceuticals, Inc. today announced that its Board of Directors has authorized the Company and certain of its subsidiaries to voluntarily file under the Companies' Creditors Arrangement Act (the "CCAA") in order to continue implementation of its previously announced recapitalization transaction.  The proposed recapitalization transaction is expected to conclude with the elimination of Angiotech's $250 million 7.75% Senior Subordinated Notes (the "Subordinated Notes") and obligations related thereto, thereby substantially improving the Company's liquidity, credit ratios and financial position.

"After concluding many months of deliberations with various parties, we have elected to pursue the completion of our proposed recapitalization transaction through a CCAA proceeding, a possible path we originally described in our October 2010 press release," said Dr. William Hunter, President and CEO of Angiotech.  "We believe that this approach will best facilitate the expedient conclusion of our proposed recapitalization, and thereby allow us to achieve the improvements to our liquidity and capital structure that will be necessary to pursue our business goals."

"During this process we expect our business operations to continue substantially as usual, as has been the case since our original announcement of the proposed recapitalization in October of 2010," said Thomas Bailey, Chief Financial Officer of Angiotech.  "Importantly, Wells Fargo Capital Finance has agreed in principle to provide interim financing over the course of our proceedings to facilitate the Company's ordinary course business activities."

As part of this process, Angiotech has reached an agreement (the "Fourth Amendment") with the holders (the "Consenting Noteholders") of a majority of the outstanding Subordinated Notes to amend certain provisions contained in the previously announced Recapitalization Support Agreement dated October 29, 2010 and amended on November 29, 2010, December 15, 2010 and January 11, 2011 (as amended, the "Support Agreement").

As summarized in the press release dated October 29, 2010 and as described more fully in the previously filed Support Agreement dated October 29, 2010, the Consenting Noteholders have agreed to exchange their Subordinated Notes for common stock in the Company (the "Recapitalization Transaction"). Qualifying holders of the Subordinated Notes (the "Noteholders") participating in the Recapitalization Transaction would receive their pro rata share of up to 96% of the common stock of Angiotech issued and outstanding following the completion of the Recapitalization Transaction, subject to potential dilution.  The Fourth Amendment amends certain provisions of the Support Agreement relating to the implementation of the Recapitalization Transaction pursuant to a plan of compromise or arrangement under the CCAA and the terms thereof.  Concurrent with the execution of the Fourth Amendment, the Consenting Noteholders provided their written consent enabling the Company to pursue the Recapitalization Transaction by way of a plan of compromise or arrangement under the CCAA.  Pursuant to the terms of the Support Agreement, any plan of compromise or arrangement under the CCAA that is approved in connection with the Recapitalization Transaction will include the cancellation of all of the Company's existing shares and options without any payment or compensation to existing shareholders or option holders.

In addition, Angiotech and U.S. Bank National Association, as successor trustee under the indenture governing the Subordinated Notes, dated as of March 23, 2006 (as amended, supplemented or otherwise modified from time to time, the "Subordinated Note Indenture"), at the direction of a majority of the Noteholders, have executed a supplement to the Subordinated Note Indenture (the "Supplemental Indenture").  The Supplemental Indenture extends the grace period applicable to interest payments due on the Subordinated Notes from 120 days to 211 days before an event of default occurs.  The Subordinated Note Indenture was previously amended on October 29, 2010, November 29, 2010 and December 21, 2010 to extend this grace period to 60 days, 90 days and 120 days, respectively.

The proposed Recapitalization Transaction is supported by Noteholders representing over 84% of the aggregate principal amount of outstanding Subordinated Notes.  The Angiotech Entities are currently negotiating the terms of a plan of compromise or arrangement in respect of the Noteholders' claims and the claims of certain other creditors (the "Plan"), which Plan will be filed with the Court.

The Angiotech Entities believe that the implementation of the Recapitalization Transaction through the Plan under Court supervision represents the best alternative for the long-term interests of the Angiotech Entities, their suppliers, customers and other stakeholders. The Recapitalization Transaction will address the Angiotech Entities' current debt level, preserve jobs and preserve the Angiotech Entities' business as a going concern. Protection under the CCAA will provide the Angiotech Entities with the time and stability needed to implement a controlled financial restructuring and ensure they continue as stronger businesses with a materially improved financial outlook.

The Angiotech Entities' operations are expected to continue as usual during the recapitalization process, and obligations to employees and suppliers of goods and services will continue to be met in ordinary course. Angiotech management remains responsible for the day-to-day operations of the Angiotech Entities. The Company also announced that Wells Fargo Capital Finance LLC has agreed in principle to provide debtor-in-possession ("DIP") financing to Angiotech, which is expected to provide the Company up to approximately $25 million of available capital during the CCAA proceedings. The Company's operating revenue combined with the proposed DIP financing are expected to provide sufficient liquidity to meet ongoing obligations and ensure that normal operations continue without interruption while the Recapitalization Transaction is implemented.

The Plan must be approved by a majority in number of the affected creditors (including Noteholders) and two-thirds in amount of their claims. As noted above, pursuant to the Support Agreement, Noteholders representing over 84% of the aggregate principal amount of outstanding Subordinated Notes have agreed to vote in favour of the Plan. The support of the Consenting Noteholders for the proposed Recapitalization Transaction and implementation of the Plan is subject to the satisfaction of a number of conditions and the Support Agreement may be terminated in certain events.

The CCAA filing applies to Angiotech, 0741693 B.C. Ltd., Angiotech International Holdings, Corp., Angiotech Pharmaceuticals (US), Inc., American Medical Instruments Holdings, Inc., NeuColl, Inc., Angiotech BioCoatings Corp., Afmedica, Inc., Quill Medical, Inc., Angiotech America, Inc., Angiotech Florida Holdings, Inc., B.G. Sulzle, Inc., Surgical Specialties Corporation, Angiotech Delaware, Inc., Medical Device Technologies, Inc., Manan Medical Products, Inc. and Surgical Specialties Puerto Rico, Inc. (collectively, the "Angiotech Entities").

Concurrently with the execution of the Fourth Amendment, the Company entered into an agreement (the "Fourth FRN Extension Agreement" and, together with the Fourth Amendment, the "Amendments") with holders (the "FRN Noteholders") of a majority of the Company's existing Senior Floating Rate Notes due 2013 (the "Existing Floating Rate Notes") to extend to February 7, 2011 the date by which Angiotech must commence the exchange offer outlined in the previously announced Floating Rate Note Support Agreement dated October 29, 2010 and amended on November 29, 2010, December 15, 2010 and January 11, 2011 (as amended, the "FRN Support Agreement").

As described more fully in the press release dated October 29, 2010, under the terms of the FRN Support Agreement, Angiotech will offer to exchange Existing Floating Rate Notes for new floating rate notes (the "New Floating Rate Notes"). The exchange offer will be open to all qualifying holders of the Existing Floating Rate Notes. The New Floating Rate Notes will be secured by a second lien over the assets and property of the Company and certain of its subsidiaries and will otherwise be issued on substantially the same terms and conditions as the Existing Floating Rate Notes other than amendments to certain covenants in respect of the incurrence of additional indebtedness, liens and change of control.

Angiotech today also announced that on January 27, 2011 it reached an agreement (the "QSR Settlement Agreement") with QSR Holdings, Inc. ("QSR"), as the representative for the former stockholders of Quill Medical, Inc. ("QMI"), providing for the full and final settlement of all claims (the "Settled Claims") in respect of the Agreement and Plan of Merger, dated May 25, 2006, by and among Angiotech, Angiotech Pharmaceuticals (US), Inc. ("Angiotech US"), Quaich Acquisition, Inc. and QMI.  Under the terms of the QSR Settlement Agreement, Angiotech US is required to make a payment of $6 million to QSR, $2 million of which is payable at the earlier of the completion of the CCAA proceeding or May 31, with the remainder payable in equal monthly installments over 24 months.  The claims being advanced by QSR in connection with the arbitration and federal litigation described in the press release issued by the Company on October 6, 2010 are included in the Settled Claims.

The Amendments, the Supplemental Indenture and the QSR Settlement Agreement will be filed by the Company on both SEDAR and EDGAR, and the descriptions of the Amendments, the Supplemental Indenture and the QSR Settlement Agreement contained in this press release are qualified by the full text of the applicable Amendment, the Supplemental Indenture or the QSR Settlement Agreement, as applicable.

Source: ANGIOTECH PHARMACEUTICALS, INC.