Invacare files for bankruptcy with plans to cut £194m debt and invest for “future growth”
US-based medical device manufacturer Invacare Corporation filed for bankruptcy on Tuesday with plans to cut its debt load by US$240m (£194m) after supply chain disruptions and surging freight costs bruised its finances.
The Ohio-based firm listed assets and liabilities of as much as US$1 billion each in its Chapter 11 petition, filed in Houston. The bankruptcy filing allows it to keep operating while it works on a plan to repay creditors.
To facilitate its financial restructuring, the company has entered into a Restructuring Support Agreement (RSA) with its debt holders.
The RSA includes a “backstop” for a rights offering to holders of claims, providing Invacare with US$60 million in equity capital, allowing the company to repay certain debt obligations and facilitate its transformation plan.
Additionally, the company stated that to effectuate these transactions, Invacare and two US-based subsidiaries commenced voluntary Chapter 11 cases.
Invacare’s other businesses throughout the rest of the world, it said, “remain strong” and are excluded from these filings. The company does not anticipate these filings to impact its ability to manufacture and deliver products to its customers globally.
Upon emergence from Chapter 11, the company stated that it intends to deliver improved profitability and free cash flow in 2023 and beyond, while building on its legacy as a leader and innovator in the lifestyle and mobility and seating markets.
In a statement, Invacare stated that a significant reduction of the company’s debt balance and a “substantial new money investment” will enhance the company’s liquidity, thereby “enabling it to invest for future growth.”
The company expects to be financially positioned to “seize opportunities” and capitalize on a significant upward shift in market demand.
Geoff Purtill, President and Chief Executive Officer at Invacare commented, “The actions announced today mark a big step forward for Invacare. 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. Global demand is strong, and by increasing our financial flexibility, we will be able to focus on continuing to design, manufacture and distribute products. We have a clear vision for the future, and we are working expeditiously towards our goals.”
Steven Rosen, Chief Executive Officer of Azurite Management, the largest shareholder of Invacare added: “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.”
Invacare is a manufacturer and distributor in its markets for medical equipment used in non-acute care settings. At its core, the company designs, manufactures and distributes medical devices that help people to move, rest, and perform essential hygiene.
There were signs that the company was struggling in 2022 when it announced the removal of President and CEO Matthew Monaghan from its executive leadership team in August 2022 following a decline in net sales for the second quarter of 2022.
