New Jersey pharmaceutical maker Theragen Inc. must immediately now pay all of the outstanding principal and accrued interest on its Series 2005 bonds because the borrower has been in default for more than 60 days, according to trustee Bank of Oklahoma NA.
The New Jersey Economic Development Authority sold $3.5 million of unrated bonds maturing in 2025 on behalf of Theragen in 2005.
The borrower missed a Nov. 1 debt-service payment that includes $100,000 in principal and $133,000 in interest, according to the official statement.
Theragen has $3.32 million of principal outstanding on the bonds, according to the OS, including the missed Nov. 1 principal payment of $100,000. The debt carries an interest rate of 8%.
Bond proceeds helped finance the acquisition of a 69,094-square-foot facility in East Windsor, N.J. The debt is secured by a second-lien mortgage on that property and also an additional first-lien mortgage on a six-acre parcel of land.
Theragen’s chief executive officer and president is Bharat Patel. He and his wife, Pragna Patel, are individual guarantors of the Series 2005 bonds. Bharat Patel is also president of Neil Laboratories Inc., the corporate guarantor of the debt.
According to a Nov. 20 material event notice, Theragen has failed to file audited balance sheets and income and expense statements for it and Neil Laboratories with the Bank of Oklahoma.
Theragen has yet to obtain casualty insurance and liability insurance on the East Windsor facility, putting the borrower in mortgage default, the trustee said.
In addition, the borrower has not replenished the debt-service reserve fund, as required under bond agreements.
“Because of the occurrence of the events of default and the mortgage default, the trustee ... hereby declares the entire principal amount and accrued interest of all the outstanding bonds to be immediately due and payable,” the event notice says.
“The trustee has the right to take action to collect the payments due under the loan documents (as defined in the agreement), including, but not limited to, the foreclosure of the property subject to the mortgage and the additional mortgage and the enforcement of the corporate guaranty and the individual guaranty,” it says.
A message for Bharat Patel at Theragen’s offices was not returned.
The trustee and the underwriter of the 2005 bonds, Bergen Capital Inc., declined to comment. Buchanan Ingersoll & Rooney PC, which was Theragen’s counsel on the bond deal, did not respond to requests for comment by press time. The NJEDA also declined to comment.
The OS was not shy about the investment vulnerability on the Series 2005 bonds.
“The bonds are speculative securities and involve a high degree of risk and should be purchased only by persons who can afford to lose a substantial portion of their investment,” the OS said.