Carestream Health has filed for bankruptcy. The former Kodak Health unit expects to continue operations through the court-supervised Chapter 11 process.
“We are commencing the final stage of our recapitalization process, which will significantly enhance our ability to navigate a dynamic market,” said David Westgate, chairman, president and CEO of Carestream, in a statement this week.
The voluntary filing under Chapter 11 of the United States Bankruptcy Code is part of a recapitalization plan announced in April. Carestream entered that agreement with lenders holding more than 50.1 percent and 85.9 percent of its first and second lien debt, respectively. At that time, Carestream said the transaction would strengthen the private company’s balance sheet.
The company’s lenders, who are exchanging debt for equity, will become the new owners of Carestream. They voted in favor of the bankruptcy which will shave roughly $470 million of debt, $250 million more than planned earlier this year, officials said.
“Since announcing our recapitalization process in April, our lenders have remained overwhelmingly supportive, and we have worked constructively with them to complete the transaction,” Westgate said. “As our talks evolved, we determined the best course of action was to implement the agreement through an expedited court-supervised process. With a clear path to completion, we expect to emerge from this process as a stronger partner to our customers, with significantly reduced debt and new owners who also continue to believe in the future of Carestream.”
Carestream expects to complete the recapitalization in 35 to 45 days. To reinforce the company’s liquidity, some lenders have committed to a $80 million debtor-in-possession facility which will help with costs of the process. The Chapter 11 does not apply to Carestream’s units abroad.
Westgate believes strong market opportunities lie ahead for Carestream.
“I am confident in the strength of our core business and our ability to maintain market leadership moving forward,” he said.
Toronto’s Onex Corp. acquired Carestream for more than $2 billion in 2007. Ten years later, Onex sold Carestream’s dental imaging business to a global private investment firm. Last year, Onex began to explore ways to offload the medical imaging portion as well.