Aceto Corporation: $380M New Mountain Chemicals Sale and Chapter 11 Liquidation

Aceto Corporation and eight affiliated debtors filed chapter 11 in the U.S. Bankruptcy Court for the District of New Jersey on February 19, 2019, lead case 19-13448 before Hon. Vincent F. Papalia. The publicly traded specialty-ingredient and generic pharmaceutical company entered the case with a fully developed prepetition sale plan, a $100 million DIP commitment from its prepetition lender Cerberus Business Finance, and stalking horse agreements covering both of its core operating businesses.

The case was architected around two parallel section 363 sales: the Chemical Plus Business (active pharmaceutical ingredients and the company's 1,100-product specialty chemicals distribution platform) sold to a New Mountain Capital affiliate for roughly $380 million after a competitive auction, and the Rising Pharmaceuticals generic drug business sold to Shore Suven Pharma, Inc. without a competing auction bid. The Second Modified Joint Plan of Liquidation was confirmed on September 18, 2019 and went effective October 1, 2019, leaving a Plan Administrator to wind down nine debtor entities and pursue residual litigation. As of the most recent distribution report, the Aceto Chemical Plus general unsecured class had been paid in full while Rising Pharma unsecured creditors had received roughly 26.9%, with further distributions tied to resolution of an $83 million disputed claim that produced a June 2025 money judgment and dueling appeals.

Debtor(s)	Aceto Corporation (9 jointly administered entities, including Rising Pharmaceuticals, LLC, Aceto Agricultural Chemicals Corporation, Acetris Health, LLC, PACK Pharmaceuticals, LLC, Arsynco, Inc., Aceto Realty LLC, and Acci Realty Corp.)
Court	U.S. Bankruptcy Court, District of New Jersey
Case Number	19-13448
Judge	Hon. Vincent F. Papalia
Petition Date	February 19, 2019
DIP Facility	Up to $100 million senior secured superpriority revolving facility from Cerberus Business Finance, LLC (interim draw of $15 million; $23 million prepetition revolver roll-up)
Plan Type	Joint Liquidating Plan implemented through two section 363 sales
Confirmation Date	September 18, 2019
Effective Date	October 1, 2019
Claims Agent	Prime Clerk LLC

Failed Out-of-Court Financing and the $60 Million Liquidity Gap

By late November and early December 2018, Aceto management projected a working capital shortfall and estimated that the company needed approximately $60 million in additional liquidity to sustain operations through a sale process targeted for completion by mid-2019. The company was operating under a "September Amendment" to its prepetition credit agreement that waived certain financial covenants, and management projected that it would fail the minimum liquidity covenant and would need a separate waiver for an interest payment default on its Deferred Payment Obligation.

PJT Partners, retained as investment banker, ran a multi-pronged prepetition financing process. The prepetition revolving lenders declined to extend additional borrowings beyond their existing commitments, and PJT contacted 19 third-party financial institutions to solicit either a $240 million first-lien term loan or an $85 million second-lien term loan. Eleven institutions conducted diligence and none submitted a proposal that met the company's requirements.

The capital-structure overhang made an out-of-court fix particularly difficult. The 2016 acquisition of generic-pharma assets from Citron and Lucid had left Aceto with a $50 million Deferred Payment Obligation (5% interest, due December 21, 2021) plus an obligation to issue 5.122 million shares of common stock to the sellers. That obligation sat alongside $143.75 million of 2.00% Convertible Senior Notes due November 2020 and a fully drawn revolving credit facility, leaving little room to rerate the balance sheet without bankruptcy. Management ultimately determined that a chapter 11 filing structured around a court-supervised section 363 sale process was the most value-maximizing alternative, a conclusion later recognized by the Turnaround Management Association as its 2020 Large Company Transaction of the Year.

A federal judge dismissed shareholder claims against Aceto's former directors and officers in August 2020, ruling that the company's prepetition financial projections were protected by the safe harbor and that the plaintiffs had failed to plead securities fraud.

Cerberus-Anchored Capital Structure and the 2016 Citron Overhang

Aceto entered the case with a layered capital stack dominated by a Cerberus-led secured credit facility and the convertible notes. Approximately $85 million of revolving loans and $120 million of term loans were outstanding under an Amended and Restated Credit Agreement with Cerberus Business Finance, LLC as administrative and collateral agent, secured by substantially all assets. The convertible noteholders were the dominant unsecured constituency, with Citibank, N.A. as indenture trustee for $143.75 million of 2.00% Convertible Senior Notes due November 2020. The $50 million Deferred Payment Obligation owed to the Citron/Lucid sellers sat outside the Cerberus facility and was classified separately for plan purposes. A roughly $2.45 million JPMorgan Chase mortgage on the Port Washington, New York headquarters property rounded out the secured stack.

A January 2019 amendment to the Cerberus facility had advanced an additional $23 million of revolving loans on the eve of filing; that incremental exposure was rolled up into the DIP facility on a limited basis as part of the financing package. As of the petition date Aceto employed approximately 180 people (120 salaried, 60 hourly) plus 36 temporary staff and contractors, operating as a "virtual" company with no in-house manufacturing — a structure that simplified the asset sale architecture but later complicated cure-cost negotiations because most production was tied to third-party supply contracts that needed to be assumed and assigned.

$100 Million Cerberus DIP and Sale-Milestone Discipline

The debtors obtained a senior secured superpriority revolving DIP credit facility of up to $100 million from a syndicate of the same prepetition secured lenders, with Cerberus Business Finance, LLC serving as administrative and collateral agent. The interim order authorized an initial draw of up to $15 million; the final order on March 15, 2019 raised that to the full commitment. Interest accrued at the Adjusted LIBO Rate plus 6.00% (or Alternate Base Rate plus 5.00%), with a 2.00% default rate kicker. The DIP carve-out for professional fees was capped at $1.5 million plus $50,000 of post-trigger administrative expenses, and a $23 million limited roll-up of January 2019 prepetition revolving advances was layered into the financing.

Maturity ran to the earliest of six months post-petition, the plan effective date, consummation of a sale of substantially all assets, or termination of the DIP commitments. Adequate protection to the prepetition secured parties included replacement liens, superpriority administrative claims, and current payment of professional fees and expenses.

Milestone covenants required filing sale procedures motions within seven days of the DIP effective date, entry of a sale procedures order within 30 days, court approval of the chemical-asset sale within 40 to 45 days of the procedures order, and sale consummation within 30 days of the sale order. Cerberus held the prepetition debt, the DIP commitments, and the sale-milestone covenants.

Dual-Track 363 Sales: New Mountain Capital for Chemicals and Shore Suven for Rising Pharma

Both core businesses had been marketed before the petition date. PJT had run a structured prepetition process with a first-round non-binding indication-of-interest deadline of November 14, 2018, a second-round bid deadline of January 15, 2019, and a best-and-final binding-offer deadline of February 12, 2019. NMC Atlas, L.P., an affiliate of New Mountain Capital Group, executed a stalking horse agreement for the Chemical Plus Business on February 18, 2019 — one day before the petition.

Chemical Plus Business sale. The bidding procedures order for the Chemical Plus Business was entered February 21, 2019. NMC's stalking horse purchase price was $338 million in cash, plus assumption of certain contract cure costs and other liabilities. An auction held April 12, 2019 produced a winning bid by NMC that delivered approximately $42 million in incremental value above the stalking horse consideration, putting total post-auction proceeds in the neighborhood of $380 million. The sale order was entered April 16, 2019, and the transaction closed April 29, 2019. The acquired assets later rebranded as Actylis in 2022 after seven New Mountain bolt-on acquisitions completed in roughly two years.

Rising Pharma sale. The Rising Pharmaceuticals stalking horse was Shore Suven Pharma, Inc., a privately held New Jersey pharmaceutical joint venture backed by India-based Suven Life Sciences. The consideration package combined approximately $15 million in net cash (after roughly $12 million in credits for amounts owed by the stalking horse to Rising), approximately $125 million in assumed liabilities (including roughly $105 million in contract assumption cure costs), and a reduction of the Deferred Payment Obligation from approximately $50 million to $30 million inclusive of mutual release and interest adjustments. The bidding procedures order was entered March 19, 2019, and Shore Suven was the only party to submit a binding offer by the February 12 deadline; no auction was held. The sale order was entered April 10, 2019, and a related order approved the mutual release of pre-existing commercial claims between Rising/Aceto and the stalking horse.

Arsynco Carlstadt property. A separate private sale process disposed of the former chemical plant site in Carlstadt, New Jersey, owned by debtor Arsynco, Inc., together with assumption and assignment of contracts with BASF Corporation. The court authorized the private sale on September 4, 2019. The Carlstadt property carried environmental remediation obligations and potential responsible-party liability in the Berry's Creek Study Area. The site is referenced in U.S. Army Corps of Engineers hazardous-waste survey work for the New York/New Jersey harbor region.

A small set of limited objections to both sale motions — primarily directed at executory-contract assumption and cure amounts and Cigna entity issues — were resolved consensually before the respective sale hearings.

Liquidating Plan, Substantive Consolidation, and Class 3A/3B Recoveries

The Second Modified Joint Plan of Liquidation was filed July 23, 2019, with the solicitation version of the disclosure statement following on July 26, 2019. The plan adopted a partial substantive consolidation structure that grouped debtors into the "Aceto Chemical Plus Debtors" (Aceto, Aceto Agricultural Chemicals, Aceto Realty) and the "Rising Pharma Debtors" (Rising, Rising Health, Acetris, PACK), with Arsynco and Acci Realty kept separate to ring-fence environmental and real estate exposure. A Plan Administrator was appointed to administer post-effective-date wind-down and dissolution, supervised by an Oversight Committee comprising three to five members designated by the Creditors' Committee. The confirmation order was entered September 18, 2019, and the plan went effective October 1, 2019. All interests in the parent were cancelled, released, and extinguished on the effective date, per the FINRA UPC notice for the ACETQ ticker.

The class structure produced very different outcomes for the two unsecured silos:

The Deferred Payment Obligation claim was allowed at $30 million within Class 3A but capped at $20 million for distribution purposes, reflecting the negotiated reduction tied to the Shore Suven sale and mutual release. The convertible notes traded into Class 3A on a pari passu basis with trade and other unsecured claims of the chemicals-side debtors; that class effectively received the proceeds of the New Mountain auction overbid.

The actual distribution arc, set out in the Fourth Report of Distributions filed December 29, 2020, confirmed the divergence the disclosure statement had projected. Class 3A (Aceto Chemical Plus GUC) was paid in full, including post-petition interest, with the fourth distribution serving as the final distribution for that class. Class 3B (Rising Pharma GUC) had received 26.90% of allowed claims to date, with further distributions held back pending resolution of the Sigmapharm dispute and other contingencies. Class 3C (Arsynco) had received nothing, reflecting unresolved environmental and disputed claim positions, and Class 3D (Acci Realty) saw all claims disallowed or withdrawn. An IRS refund of approximately $47.1 million was identified as under investigation as of December 2020, with potential to feed further distributions if it materialized.

Environmental claims and CERCLA settlement. The DOJ lodged a proposed CERCLA consent decree on February 26, 2021 resolving claims by EPA, the Department of the Interior, NOAA, and the New Jersey Department of Environmental Protection against the liquidating debtors. The settlement provided for allowed general unsecured claims of $17,781,000 against Arsynco, Inc. for response costs and natural resource damages, to be satisfied through the existing liquidation plan. A separate NJDEP consent order addressed state environmental obligations.

Professional retentions and fees. Lowenstein Sandler LLP (Kenneth A. Rosen and S. Jason Teele leading) served as debtors' counsel, with PJT Partners as investment banker, AP Services, LLC providing CFO/CRO services through Rebecca A. Roof, KPMG LLP as tax advisor, GlassRatner as financial advisor, and Prime Clerk as claims and noticing agent. The Official Committee of Unsecured Creditors retained Stroock & Stroock & Lavan LLP as lead counsel, Porzio, Bromberg & Newman, P.C. as local counsel, and Houlihan Lokey Capital, Inc. as financial advisor. The Roof retention was approved March 14, 2019, and Carrianne J.M. Basler later succeeded Roof as CFO in mid-June 2019. The Omnibus Final Fee Order entered December 20, 2019 awarded $14.18 million to Lowenstein Sandler, $8.44 million to PJT Partners, $3.03 million to Stroock, $1.85 million to Houlihan Lokey, $977,083 to Porzio Bromberg, $739,553 to KPMG, $158,076 to GlassRatner, and $19,667 to Prime Clerk through the September 30, 2019 fee period.

Sigmapharm Adversary, Aurobindo Sabotage Suit, and the 2025 Trial Judgment

The most consequential post-effective-date contested matter was the adversary proceeding between Rising Pharmaceuticals and Sigmapharm Laboratories, LLC over a co-promotion and co-development agreement. Sigmapharm filed proofs of claim against Rising totaling approximately $83.1 million, and Rising/Aceto filed an adversary complaint (Adv. Pro. No. 19-02053) on May 31, 2019. The matter was litigated through pre-trial motion practice, including the bankruptcy court's denial without prejudice of Sigmapharm's spoliation sanctions motion and rulings on Sigmapharm motions in limine seeking to exclude post-litigation accounting documents and a financial expert's video deposition.

The case ultimately went to trial before Judge Papalia. On June 18, 2025, the court issued an Opinion After Trial finding that both parties had committed material breaches: Sigmapharm by terminating the agreement without required notice and an opportunity to cure, and Rising/Aceto by failing to provide complete, accurate, and transparent records under the audit provisions. The court entered a money judgment in favor of Rising/Aceto in the net amount of $7,986,781 — calculated as $9,096,273 in credit refund damages owed to Rising/Aceto, offset by $1,109,492 awarded to Sigmapharm on a cost-of-goods calculation dispute — with interest accruing at the Federal Judgment Rate from March 23, 2018, the date of Sigmapharm's breach. Both sides filed notices of appeal in July 2025, and Sigmapharm moved to stay the judgment pending appeal. Sigmapharm claims estimation for plan distribution purposes had been the subject of separate cross-motion practice during the post-effective-date period.

A second adversary, filed June 6, 2019, accused Aurobindo Pharma and its U.S. subsidiary Aurolife Pharma LLC of sabotaging Aceto's generic pharmaceutical business and causing the company's collapse. Aurobindo denied the allegations and characterized the claims as baseless.

The debtors also entered three stipulations with the DOJ Antitrust Division during the case, and Rising's successor entered into a deferred prosecution agreement related to False Claims Act and antitrust allegations. Successor entity Rising Pharma Holdings, Inc. — formed to acquire the assets through the Shore Suven transaction — separately clarified its independence from the bankrupt Rising Pharmaceuticals and from Aceto Corporation in March 2020 reporting.

Key Timeline

Frequently Asked Questions

Who is the claims agent for Aceto Corporation?

Prime Clerk LLC serves as the claims and noticing agent in the Aceto Corporation chapter 11 cases. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

Who bought Aceto's chemicals business?

NMC Atlas, L.P., an affiliate of New Mountain Capital Group, L.L.C., acquired the Chemical Plus Business through a section 363 sale that closed April 29, 2019. The stalking horse purchase price was $338 million, and the April 12, 2019 auction produced a winning NMC bid that delivered approximately $42 million in incremental value above the stalking horse consideration. The acquired business was rebranded as Actylis in 2022.

Who bought Rising Pharmaceuticals?

Shore Suven Pharma, Inc., a privately held New Jersey joint venture backed by Suven Life Sciences, acquired the Rising Pharmaceuticals generic drug business through a section 363 sale order entered April 10, 2019. The consideration package combined roughly $15 million in net cash, approximately $125 million in assumed liabilities (including roughly $105 million in contract cure costs), and a $20 million reduction of the Citron/Lucid Deferred Payment Obligation. No competing bids were submitted by the February 12, 2019 deadline, so no auction was held.

What did unsecured creditors recover?

Class 3A (Aceto Chemical Plus general unsecured claims, including the $143.75 million 2.00% Convertible Senior Notes) was paid in full, including post-petition interest, by the December 2020 fourth distribution. Class 3B (Rising Pharma GUC) had received 26.90% of allowed claims as of the same report, with further distributions tied to resolution of disputed claims, including the Sigmapharm dispute. Class 3C (Arsynco) had received no distributions due to unresolved environmental and disputed claim positions.

What happened in the Sigmapharm litigation?

After more than six years of litigation in adversary proceeding 19-02053, Judge Vincent F. Papalia issued an Opinion After Trial on June 18, 2025 finding material breaches by both parties. The court entered a net money judgment of $7,986,781 in favor of Rising Pharmaceuticals/Aceto, with interest accruing from March 23, 2018. Both parties appealed in July 2025, and Sigmapharm moved to stay the judgment pending appeal.

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