Invacare (NYSE:IVC) announced today that it initiated a number of actions in an effort to position itself for long-term success.
The Elyria, Ohio–based maker of wheelchairs, medical beds, wound care products and more entered into a “Restructuring Support Agreement” (RSA). The RSA covers substantially all of its debt holders. That includes its term loan lender, all holders of convertible senior secured notes and holders of a majority of convertible senior unsecured notes.
Invacare said this provides for a significant reduction of its debt balance and a “substantial” new money investment. It expects to enhance its liquidity and enable investment in future growth.
The transactions agreed to in the RSA include a reduction of Invacare’s funded debt by approximately $240 million. It also includes a backstop for a rights offering to holders of claims, providing Invacare with $60 million in equity capital. This allows the company to repay certain debt obligations and facilitate its transformation plan.
Additionally, to effectuate these transactions, Invacare and two U.S.-based subsidiaries commenced voluntary Chapter 11 cases. They did so in the U.S. Bankruptcy Court for the Southern District of Texas. The company said its other businesses “remain strong” and remain excluded from these filings.
Invacare believes the filings won’t impact its ability to manufacture and deliver products to customers globally.
“The actions announced today mark a big step forward for Invacare,” said Geoff Purtill, Invacare president and CEO. “Having the full support of our secured term loan lender and a majority of our convertible noteholders will enable the prearranged filings to proceed efficiently. The company expects to emerge with significantly less debt on its balance sheet and will secure additional liquidity to support long-term growth.”
More info on Invacare’s bankruptcy filing
Invacare said it filed a number of customary “first-day” motions for court approval. This helps to facilitate a smooth transition into Chapter 11 and support operations during its cases.
The company requested to continue payment of employee wages and benefits without interruption. It expects the authority to grant that request. Invacare anticipates the continuation of operations and its ability to pay suppliers in the ordinary course.
Upon emergence from Chapter 11, Invacare expects its financial position to enable it to capitalize on “a significant upward shift” in market demand. It expects improved profitability and free cash flow this year and beyond.
“Invacare has the right leadership, vision and the financial commitment from the sponsorship group to succeed, and we are confident that this Chapter 11 process will result in a comprehensive recapitalization transaction that will not only stabilize liquidity but also de-lever the balance sheet and better position Invacare for future growth,” said Steven Rosen, CEO of Azurite Management, the largest shareholder of Invacare.
Other details on the RSA and Invacare’s current position
Invacare said it plans to implement its RSA through a plan of reorganization. It provides for a $70 million debtor-in-possession loan financing facility with new money funding of $35 million. Upon court approval, this facility gives Invacare the stability and liquidity needed to continue operations in the ordinary course.
The company also received a commitment from a lender for an $85 million senior secured first-lien term loan facility. It also has a commitment for senior first lien secured convertible notes totaling an amount not to exceed $41.5 million. That amount will be outstanding when Invacare emerges from Chapter 11.
News of Invacare’s financial restructuring may not come as a surprise. The company already began making some significant changes — some unenforced — over the course of the past year.
In August, Invacare relieved CEO Matthew Monaghan of his duties, replacing him with Purtill. The following month, it received notice from the New York Stock Exchange (NYSE) that it is not in compliance with certain rules.
The average closing price of the company’s common shares came in under $1 per share over a consecutive 30-day trading period. Shares remain under $1 today, currently trading at about 66¢ apiece.
Invacare also ended 2022 by consummating an additional draw of $5.5 million in term loans under a credit agreement.