Refinancing action will reduce net debt by
approximately 65%
Global manufacturing and delivery of products
to continue uninterrupted to meet robust customer demand
Strong sequential improvement achieved in
preliminary 4Q22 financial results
Executed strategic actions accelerating a
renewed focus on core businesses
Invacare Corporation (NYSE: IVC) (“Invacare” or “the company”),
a leading manufacturer and distributor of medical equipment used in
non-acute care settings, today announced actions to strengthen the
company and position it for long-term success.
To facilitate its financial restructuring, the company has
entered into a Restructuring Support Agreement (the “RSA” or
“Agreement”) with substantially all of its debt holders, including
its term loan lender, all of the holders of convertible senior
secured notes, and holders of a majority of its convertible senior
unsecured notes. The Agreement provides for a significant reduction
of the company’s debt balance and a substantial new money
investment, which will enhance the company’s liquidity, thereby
enabling it to invest for future growth. Specifically, the
transactions agreed to in the RSA contemplate a substantial
reduction of the company’s funded debt by approximately $240
million. In addition, the RSA includes a backstop for a rights
offering to holders of claims on account of the company’s unsecured
notes and holders of general unsecured claims, providing the
company with $60 million of equity capital to repay certain of its
debt obligations and facilitate the company’s transformation
plan.
To effectuate the transactions contemplated by the Agreement,
Invacare and two of its U.S. based subsidiaries commenced voluntary
Chapter 11 cases in the United States Bankruptcy Court for the
Southern District of Texas (the “Court”). Invacare’s other
businesses throughout the rest of the world remain strong and are
not included in these filings. The company does not anticipate
these filings to impact its ability to manufacture and deliver
products to its customers globally.
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 that help Make Life’s Experiences Possible®. We
have a clear vision for the future, and we are working
expeditiously towards our goals.”
“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, chief
executive officer of Azurite Management, the largest shareholder of
Invacare.
Upon emergence from Chapter 11, the company expects to be
financially positioned to seize opportunities and capitalize on a
significant upward shift in market demand. The company 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 & seating markets.
Additional Information about the Restructuring Support
Agreement and the Financial Restructuring
The RSA will be implemented through a plan of reorganization,
which will be filed with the Court. The RSA provides for a $70
million debtor-in-possession term loan financing facility which
includes new money funding of $35 million (the “DIP Facility”).
Upon approval by the Court, the DIP Facility will provide the
company with the stability and liquidity needed to continue
operations in the ordinary course of business during the
reorganization.
The company also has a commitment from a prepetition secured
lender for a senior secured first lien term loan facility in an
aggregate principal amount of up to $85 million and a commitment
for senior first lien secured convertible notes in an aggregate
principal amount not to exceed $41.5 million, which will be
outstanding when it emerges from Chapter 11.
Capacity for additional exit financing will be available to the
company in the form of two revolving credit facilities with
combined availability of up to $70 million.
Invacare has filed a number of customary “first day” motions for
Court approval to facilitate a smooth transition into Chapter 11
and support operations during its cases. The company has requested
and expects the authority to continue payment of employee wages and
benefits without interruption, as well as the continued support of
its customer programs and product warranties. The company expects
operations to continue and to pay its suppliers in the ordinary
course of business for all authorized goods delivered and services
rendered after the filing date.
Court filings and other information related to the proceedings
are available on a separate website administrated by the company’s
claims agent, Epiq at http://dm.epiq11.com/Invacare. Stakeholders
with questions about the process may call Epiq at 1-855-795-2124
(U.S.) or +1-503-974-1666 (International).
Advisors
Kirkland & Ellis LLP, McDonald Hopkins LLC, and Jackson
Walker LLP are serving as legal counsel, Miller Buckfire is serving
as investment banker, and Huron Consulting Group is serving as
financial advisor to the company. C Street Advisory Group, LLC is
serving as strategic communications advisor to the company. Brown
Rudnick LLP is serving as legal counsel and GLC Advisors & Co.,
LLC is serving as investment banker to the ad hoc committee of
unsecured notes.
Strong Sequential Improvement Achieved in Preliminary 4Q22
Financial Results
In the fourth quarter of 2022, the company continued to
experience strong demand for its lifestyle and mobility &
seating products and elevated open orders compared to the end of
2021. As guided in its 3Q22 earnings release, the company
anticipated sequential improvement in its key financial metrics.
Based on preliminary unaudited 4Q22 results, the company
anticipates reporting the following results for 4Q22 as compared to
3Q22:
- Reported net sales growth of 6% to $181 million as compared to
$170 million, with growth in all regions and in all major product
categories;
- Gross margins, excluding the respiratory charges in 3Q22,
improved substantially by 310 basis points to 26.6%;
- Net Loss and Adjusted EBITDA significantly improved driven by
revenue growth; gross margin expansion due to pricing actions,
favorable product mix and lower freight costs; and lower SG&A
expense; and,
- Europe returned to profitability, confirming the 3Q22 operating
loss for the segment was out of the ordinary.
Strategic Actions Executed, Including the Monetization of
Respiratory Assets, Accelerating a Renewed Focus on Core
Businesses
As part of its global transformation plan to accelerate a return
to profitability and focus on its core lifestyle and mobility &
seating product lines, the company took further decisive action to
exit non-core businesses.
On January 30, 2023, the company completed the sale of its
respiratory assets to Ventec Systems, a subsidiary of React Health.
The company also completed the sale of its Top EndTM sports and
recreation wheelchair division to Top End Sports, LLC on January
27, 2023. These divestitures will enable the company to put its
full focus on strengthening its core businesses and driving
sustainable growth.
Commenting on the company’s progress, Mr. Purtill stated
“Delivering strong sequential improvements in all key financial
metrics is testament to the actions we have undertaken to
strengthen the business and yield positive results. As a global
company, we remain focused on continuing to execute actions to
enhance service to our customers. By focusing on our core
businesses, we anticipate driving improved financial performance
over the short- and long-term.”
About Invacare Corporation
Invacare Corporation (NYSE: IVC) (“Invacare” or the “company”)
is a leading 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. The
company provides clinically complex medical device solutions for
congenital (e.g., cerebral palsy, muscular dystrophy, spina
bifida), acquired (e.g., stroke, spinal cord injury, traumatic
brain injury, post-acute recovery, pressure ulcers) and
degenerative (e.g., ALS, multiple sclerosis, elderly, bariatric)
ailments. The company’s products are important parts of care for
people with a wide range of challenges, from those who are active
and involved in work or school each day and may need additional
mobility support, to those who are cared for in residential care
settings, at home and in rehabilitation centers. The company sells
its products principally to home medical equipment providers with
retail and e-commerce channels, residential care operators,
distributors and government health services in North America,
Europe, and Asia/Pacific. For more information about the company
and its products, visit Invacare’s website at www.invacare.com.
Preliminary Estimates
The estimated results in this press release represent the
company's preliminary estimates of certain financial results for
the three months ended December 31, 2022, based on currently
available information. The company has not yet finalized its
results for this period and its consolidated financial statements
as of and for the three months ended December 31, 2022 are not
currently available. The company’s actual results remain subject to
the completion of the quarter-end closing process. As a result, the
company's actual results could be different from those set forth
herein and the differences could be material. Therefore, a reader
should not place undue reliance on these preliminary estimates of
the company's results. The preliminary estimates of the company's
results included herein have been prepared by, and are the
responsibility of, the company's management. The company's
independent auditors have not audited, reviewed or compiled such
preliminary estimates of the company's results.
Forward-Looking Statements
Certain statements contained in this press release that are not
historical facts are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. Forward-looking statements include
words or phrases such as “anticipate,” “believe,” “estimate,”
“expect,” “intend,” “plan,” “project,” “could,” “may,” “might,”
“should,” “will” and similar words. Forward-looking statements are
based on management’s current expectations, beliefs, assumptions
and estimates and may include, for example, statements regarding
the voluntary cases commenced by the company and certain of its
subsidiaries under Chapter 11 of the U.S. Bankruptcy Code in the
Court (the “Chapter 11 Cases”), the DIP Facility, the company’s
ability to consummate and complete a plan of reorganization and its
ability to complete a plan of reorganization and continue operating
in the ordinary course while the Chapter 11 Cases are pending, the
company’s expected position upon emergence from bankruptcy, the
company’s expected profitability and liquidity and the company’s
preliminary results. These statements are subject to significant
risks, uncertainties, and assumptions that are difficult to predict
and could cause actual results to differ materially and adversely
from those expressed or implied in the forward-looking statements,
including risks and uncertainties regarding the company’s ability
to successfully complete a restructuring under Chapter 11,
including: consummation of a plan of reorganization; potential
adverse effects of the Chapter 11 Cases on the company’s liquidity
and results of operations; the company’s ability to obtain timely
approval by the Court with respect to the motions filed in the
Chapter 11 Cases; objections to the company’s recapitalization
process, DIP Facility, or other pleadings filed that could protract
the Chapter 11 Cases; employee attrition and the company’s ability
to retain senior management and other key personnel due to the
distractions and uncertainties; the company’s ability to comply
with the restrictions imposed by the terms and conditions of the
DIP Facility and other financing arrangements; the company’s
ability to maintain relationships with suppliers, customers,
employees and other third parties and regulatory authorities as a
result of the Chapter 11 Cases; the effects of the Chapter 11 Cases
on the company and on the interests of various constituents,
including holders of the company’s common shares; the Court’s
rulings in the Chapter 11 Cases, including the approvals of the
terms and conditions of any plan of reorganization and the DIP
Facility, and the outcome of the Chapter 11 Cases generally; the
length of time that the company will operate under Chapter 11
protection and the continued availability of operating capital
during the pendency of the Chapter 11 Cases; risks associated with
third party motions in the Chapter 11 Cases, which may interfere
with the company’s ability to consummate a plan of reorganization
or an alternative restructuring; increased administrative and legal
costs related to the Chapter 11 process; and other litigation and
inherent risks involved in a bankruptcy process.
Forward-looking statements are also subject to the risk factors
and cautionary language described from time to time in the reports
the company files with the U.S. Securities and Exchange Commission,
including those in the company’s most recent Annual Report on Form
10-K and any updates thereto in the company’s Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K. These risks and
uncertainties may cause actual future results to be materially
different than those expressed in such forward-looking statements.
Each forward-looking statement speaks only as of the date of the
particular statement, and we undertake no obligation to publicly
update or revise any forward-looking statements, except as required
by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230131006221/en/
Investor Contact Lois Lee loislee@invacare.com
Media Contact C Street Advisory Group
Invacare@thecstreet.com
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