Joerns Healthcare looks to cut debt via pre-packaged Chapter 11 filing

By Caroline Salls

Pittsburgh, June 25 – Joerns WoundCo. Holdings, Inc., doing business as Joerns Healthcare, made a pre-packaged Chapter 11 bankruptcy filing Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

According to a news release, the company is seeking court approval of a restructuring plan that is supported by the majority of its lenders and noteholders.

Joerns said the plan will eliminate a substantial amount of debt and provide operating capital during the restructuring process and beyond.

The company said the restructuring would equitize the majority of its pre-bankruptcy first-lien obligations and all of the pre-bankruptcy second-lien obligations, result in a substantial de-levering of the debtors’ capital structure, reducing their financial debt to $80 million from $400 million, while providing new financing to fund the Chapter 11 cases and the debtors’ go-forward business.

The proposed restructuring would pay in full all other allowed claims, including general unsecured claims.

The company has requested that the plan be approved and the process complete within the next 30 to 45 days.

“Our filing today is the product of many months of discussions and careful planning about the company’s future and how to leverage our unique position in the healthcare market,” president and chief executive officer David Johnson said in the release.

“By strengthening our financial footing, Joerns will be well-positioned to capitalize on the momentum we have started over the past six months, launching four new products to serve a range of customers throughout the complete continuum of patient care.”

During the restructuring process, Joerns said all day-to-day operations will continue as normal, including payment of employees, suppliers and vendors. The company's international operations are unaffected by the restructuring.

“We remain a solidly profitable company, and this restructuring plan will help up move forward more quickly in both our core business lines and in new areas of patient care,” Johnson said in the release.

In conjunction with the bankruptcy filing, some holders of Joerns’ pre-bankruptcy first-lien obligations have agreed to backstop an $80 million multi-draw senior secured super-priority debtor-in-possession facility, with Ankura Trust Co., LLC acting as administrative agent and collateral agent.

The facility will be comprised of a multiple-draw term loan facility in a total principal amount of up to $40 million, under which the company is seeking approval to request extensions of credit of up to $20 million upon entry of an interim order, and a roll-up facility in a total principal amount of up to $40 million.

Under the roll-up facility, the lenders will be deemed to make loans on a dollar for dollar basis for every dollar of new-money loans funded by a DIP lender, and those loans will be deemed to be used to satisfy the DIP lenders’ pre-bankruptcy first-lien debt claims.

The facility will mature on the earliest of 120 days after the bankruptcy filing, the completion of a sale of all or substantially all of the debtors’ assets, the acceleration of the DIP loans and termination of the commitments, 38 days after the bankruptcy filing date if a final order has not been entered and the plan effective date.

Interest will accrue at the Base rate plus 500 basis points or Libor plus 600 bps.

According to court documents, Joerns has $100 million to $500 million in both assets and debt.

The company did not list any unsecured creditors with claims of $1 million or more.

Joerns is a Charlotte, N.C.-based healthcare equipment provider. The Chapter 11 case number is 19-11401.

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