Creditors of St. Louis-based K-V Pharmaceutical Co. have a pivotal hearing on Thursday over whether senior noteholders are entitled to recover $32.8 million in post-bankruptcy interest before holders of convertible notes begin recovering on their subordinated claims, The St. Louis Post-Dispatch reported yesterday. A bankruptcy judge in New York is expected to decide the issue. The decision precedes a confirmation hearing, set for Aug. 28, on K-V’s reorganization plan, which is based on a compromise in which holders of $200 million in convertible notes can buy the lion’s share of the reorganized business. If they win the interest rate dispute on Thursday, the company they own will be more valuable. In exchange for the $200 million in convertible debt, holders will receive 7 percent of the reorganized company’s stock for a predicted recovery of 10.9 percent, according to the revised disclosure statement.
