UPDATE 2-Canada's Angiotech to file for bankruptcy

Fri Jan 28, 2011 10:16am EST

* Says recapitalization deal to cut debt by $250 mln

* Deal supported by majority of subordinated noteholders

* Lines up $25 mln DIP loan

* Existing shareholders to be wiped out (Adds details of settlement with former stockholders of Quill Medical)

Jan 28 (Reuters) - Angiotech Pharmaceuticals Inc ANP.TO said it will file for bankruptcy protection under Canada's Companies' Creditors Arrangement Act to cut $250 million of its debt.

All of the company's existing shareholders will be wiped out without any compensation under a proposed recapitalization deal. The transaction is supported by noteholders representing more than 84 percent of the outstanding subordinated notes.

The Vancouver-based company, a specialty pharmaceutical and medical device maker, has been hit hard by declining sales of its Taxus coronary stent systems.

Angiotech has also lined up a $25 million debtor-in-possession loan from Wells Fargo Capital Finance LLC to continue operations while under creditor protection.

Under the proposed plan, noteholders will exchange their subordinated notes for a share in 96 percent of the reorganized company's common stock, Angiotech said in a statement.

The company has also agreed to pay $6 million to former shareholders of Quill Medical Inc to settle a lawsuit filed last October.

The lawsuit alleged that Angiotech, which acquired Quill Medical in 2006, misrepresented or made omissions during negotiations for the merger. (Reporting by Santosh Nadgir in Bangalore; Editing by Sriraj Kalluvila and Gopakumar Warrier)