Invacare Corp. and two of its subsidiaries in the United States have filed for Chapter 11 bankruptcy protection in Texas.
The Elyria, Ohio-based medical equipment manufacturer and distributor has already reached a “restructuring support agreement” with nearly all of its debt holders, the company announced on Wednesday.
Such agreements typically include an agreed-upon framework for debt treatment as well as a timetable for completing the reorganization, removing some uncertainty for creditors.
“The actions announced today mark a big step forward for Invacare,” said Geoff Purtill, Invacare’s president and chief executive officer, in a statement.
According to Invacare, the agreement calls for a $240 million debt reduction. According to Invacare’s quarterly report, the company’s debt stood at $410 million on September 30.
The agreement also includes $60 million in additional equity capital, which will provide Invacare with more liquidity to repay some of its debts and invest in future growth, according to Invacare.
In order to carry out this restructuring agreement, Invacare and two of its subsidiaries, Freedom Designs Inc. and Adaptive Switch Laboratories Inc., launched “prepackaged” or “pre-negotiated” bankruptcy restructuring proceedings in the United States Bankruptcy Court for the Southern District of Texas.
“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,” Purtill said.
Invacare listed assets of $757.6 million and liabilities of $676.6 million in its third-quarter report.
Wells Fargo Bank holds $212 million of Invacare notes, making it the largest unsecured creditor, according to Invacare’s bankruptcy filing. Invacare’s other top 27 unsecured claims total about $29 million, according to the bankruptcy filing.
Invacare’s other businesses “remain strong and are not included in these filings,” the company said. The company does not anticipate the bankruptcy filings to impact its ability to make or deliver products to its customers globally, it said.
Global demand for Invacare’s products, which include wheelchairs, hospital beds and patient slings, is strong, Purtill said.
But Invacare has struggled with persistent supply-chain problems during the pandemic and has been streamlining its manufacturing operations for months.
According to the company’s quarterly report, sales fell 13% to $560.4 million in the first nine months of 2022 compared to the same period in 2021. According to the report, the company’s gross profit margin fell to 18.4% in the third quarter, down from 26.9% in the same quarter a year ago.
According to the quarterly report, Invacare lost $80.5 million, or $2.23 per diluted share, in the first three quarters of 2022, compared to a loss of $47.5 million, or $1.36 per diluted share, in the same prior-year period.
Invacare fired its previous CEO, Matthew Monaghan, in August. Monaghan was hired in 2015 to help stabilize the company, which was reeling from a significant cut in federal reimbursements for its durable medical equipment and an audit.
“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 Azurite CEO Steven Rosen in the company’s statement.
Invacare (NYSE: IVC) shares closed at around 66 cents on Tuesday and have not traded since.
The New York Stock Exchange notified Invacare in September that its common stock had closed at or below $1 for 30 consecutive trading days, putting it in violation of the exchange’s minimum price listing requirement.
Invacare shares have traded as low as 33 cents since then.