Azzur Group Holdings LLC Files for Chapter 11 Bankruptcy

Introduction

Azzur Group Holdings LLC, along with its debtor affiliates, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware on March 2, 2025 (the "Petition Date"). The case is numbered 25-10342 (KBO). This filing follows a period of financial challenges and a strategic decision to pursue a sale of the company's assets.

For a local perspective on the bankruptcy filing and Azzur Group's plan to sell its consulting division, see Azzur Group of Hatboro files for bankruptcy, plans to sell consulting division.

Background

Founded in 2010, Azzur Group partners with companies in the biotechnology and pharmaceutical industries. The company provides services across the drug development lifecycle. Historically, Azzur Group operated three main business units:

Capital Structure

As of the Petition Date, the Debtors' capital structure consists of approximately $62.2 million in secured obligations, $23.2 million in general unsecured obligations, $5.2 million in promissory notes, and $3.2 million in cash on hand.

Debt Obligations

The Debtors are parties to a Loan and Security Agreement dated as of April 7, 2020 (the "Pre-Petition Loan Agreement"), which includes an asset-based revolving credit facility (the "ABL Facility") and a term loan credit facility (the "Term Loan Facility"). The obligations under these facilities are secured by a first-priority lien on substantially all of the Company's assets, subject to customary exceptions. As of the Petition Date, the Debtors' outstanding obligations to the Pre-Petition Lender total approximately $62.2 million (plus accrued and unpaid interest, costs, and fees).

Additionally, the Debtors estimate that they have approximately $23.2 million in general unsecured obligations, the majority of which is on account of leasehold obligations. This represents a significant portion of their overall debt structure, approximately 37% of their secured obligations.

Debtors Azzur Cleanrooms-on-Demand Devens, LLC and Azzur Group, LLC are each party to three unsecured promissory notes (the "Promissory Notes") with contractors. These notes were executed in July 2024 to resolve disputes related to mechanics' liens on the Debtors' leasehold estates. The original principal amounts under these three notes totaled approximately $5.9 million. As of the Petition Date, about $5.2 million remains due on account of the Promissory Notes.

As of the Petition Date, the Debtors have approximately $3.2 million in available cash, all of which constitutes cash collateral of the Pre-Petition Lender.

Ownership Structure

As of the Petition Date, Azzur Group Holdings LLC holds 100% of the equity units of Azzur Group, LLC. Azzur Blocker, LLC, BGL Azzur, LLC, and G. Knight Consulting Ltd. collectively hold Class A Preferred equity units in Azzur Group Holdings LLC totaling approximately 28.81%. Yotomatchi, LLC holds 70.09% of the Class B Common equity units, and Gary Knight holds 1.10% of the Class C Incentive Units.

Events Leading to Chapter 11 Filing

Azzur Group did not make the decision to commence these Chapter 11 cases lightly. After a year-long prepetition out-of-court marketing and sale process, the Debtors concluded that a bankruptcy filing was necessary to maximize the value of the Company’s assets. While a confluence of factors contributed to the need for Chapter 11 protection, the single largest challenge stemmed from the Company’s aggressive COD growth strategy and ongoing high operating costs—primarily due to lease commitments and utilities for multiple cleanroom locations—that were not supported by the actual, post-pandemic occupancy rates.

Early in the COVID-19 pandemic (in 2020), the Company operated only one cleanroom but anticipated a spike in long-term demand for pharmaceutical drug development. As a result, it pursued a rapid expansion of its COD footprint. However, when the pandemic subsided, the expected occupancy (and corresponding revenues) failed to materialize. This shortfall led to liquidity issues and a breach of several covenants under the Pre-Petition Loan Agreement in late 2023. After arms’-length negotiations with the Pre-Petition Lender, the Company entered into a forbearance agreement on February 26, 2024, committing the Debtors to raise a new capital investment or pursue a holistic recapitalization within strict milestone deadlines. Despite extensive efforts, the Company did not complete the required transactions by those deadlines.

For an industry-focused perspective on Azzur Group's bankruptcy and the sale of its cleanroom consulting business, see Bankrupt Azzur Group sells off cleanroom consulting business for $56m.

Prepetition Marketing and Sale Efforts

Seeking to address both liquidity shortfalls and the challenges of its COD business, Azzur Group, in December 2023, engaged DLA Piper LLP (US) as legal counsel and Ankura as financial advisor. In January 2024, the Company also retained Ankura Capital Advisors, LLC (ACA) to explore junior financing alternatives, and Brown Gibbons Lang & Company Securities, Inc. (BGL) to act as investment banker to pursue a capital stock sale or other strategic transaction. ACA reached out to 121 potential investors, and BGL contacted 63 potential structured equity investors. While these efforts yielded 39 nondisclosure agreements, only one preliminary indication of interest emerged, which was ultimately deemed not actionable.

In August 2024, the Company and the Pre-Petition Lender amended the original forbearance agreement multiple times to allow for a broader marketing process. The Company relaunched the sale efforts for one or more of its business units, contacting an additional 47 parties, resulting in 19 more nondisclosure agreements. As part of these efforts, Azzur Group entered into a letter of intent to sell its Azzur Labs business unit, which ultimately closed on January 3, 2025, for gross proceeds of $16 million. Of the total proceeds, $12 million paid down the Term Loan Facility, $2 million paid down the ABL Facility, and $2 million went to outstanding Line Advances. Following the Azzur Labs sale, the Company continued pursuing a buyer for the Azzur Consulting business unit.

Stalking Horse APA and Bidding Procedures

Azzur Group entered into a Stalking Horse Asset Purchase Agreement (APA) with Eliquent Life Sciences, Inc. on March 2, 2025, for the sale of the Azzur Consulting business unit assets. The purchase price is $56 million plus the assumption of certain liabilities. The Stalking Horse APA includes bid protections, such as a break-up fee of $1,680,000 and expense reimbursement up to $1 million.

For the official press release announcing this $56 million agreement, see Azzur Group Reaches Agreement to Sell Consulting Business for $56 Million to ELIQUENT Life Sciences.

Debtor-in-Possession (DIP) Financing

Azzur Group has secured authorization to enter into a postpetition senior secured superpriority debtor-in-possession multi-draw revolving credit facility (the "DIP Credit Facility"). This facility includes up to $8.5 million of new money and other revolving Advances (including approximately $1.3 million for Letters of Credit), for a total potential principal amount of $23.5 million. The proposed DIP Facility is designed to provide the Debtors with sufficient liquidity to fund operations throughout the Chapter 11 process and support a value-maximizing sale of their assets.

The Debtors require immediate access to this additional liquidity to ensure they can continue operating during these Chapter 11 cases and consummate the Stalking Horse APA. Without the DIP Financing, the Debtors would be unable to sustain day-to-day operations or reassure clients and employees of their continued viability.

Roll-Up of Pre-Petition Obligations and Negotiations

The terms of the DIP Financing contemplate an interim partial and final roll-up of all Pre-Petition Obligations, except for $1 million that remains as a "Remaining Pre-Petition Obligation." This structure was the result of arms'-length negotiations with the DIP Lender. Given the Debtors' existing capital structure and lack of alternative third-party financing, the roll-up provision and other DIP terms are considered fair and reasonable under the circumstances.

The Debtors' legal and financial advisors worked closely with the DIP Lender's team for multiple weeks to obtain the best possible terms. The Debtors concluded no other party was likely to provide additional financing on a junior or priming basis, making the DIP Lender's proposal the only viable path to obtain urgently needed liquidity.

DIP Milestones

Under the DIP Credit Facility, the Debtors must meet certain milestones (the "DIP Milestones"), including sale-related deadlines. These milestones are essential to ensuring the Debtors maintain progress toward a successful sale and exit from Chapter 11. If the Debtors fail to meet any of the milestones, it would constitute an Event of Default under the DIP Loan Documents. The key DIP Milestones are as follows:

For more details on Azzur Group's $23.5 million DIP financing, see Azzur Group Secures $23.5MM DIP Financing to Support Chapter 11 Sale Process.