Onex-backed Carestream begins recap process with lenders

The company expects to move through the process on an expedited basis and complete the recapitalization in about 35 to 45 days.

  • The recapitalization will eliminate about $470 million of debt
  • The transaction will strengthen Carestream’s balance sheet
  • Carestream was acquired in 2007 by Onex Corp from Eastman Kodak

Carestream Health, a Rochester, New York-based provider of medical imaging and IT systems, has begun a recapitalization process with its lenders by voluntarily filing for reorganization under Chapter 11 of the United States Bankruptcy Code.

The recapitalization will eliminate about $470 million of debt, representing a total debt reduction of $250 million more than Carestream’s previously announced recapitalization agreement. This process will significantly strengthen Carestream’s balance sheet.

Carestream was acquired in 2007 by Canadian private equity firm Onex Corp in a carveout from Eastman Kodak.

With the overwhelming support of its lenders, the company expects to move through this process on an expedited basis and complete the recapitalization in about 35 to 45 days. Certain of the company’s existing lenders have committed to provide a $80 million debtor-in-possession financing facility to reinforce the company’s liquidity and fund the costs of the process.

Carestream entities outside the United States are not part of the Chapter 11 process and are operating as normal.

“We are commencing the final stage of our recapitalization process, which will significantly enhance our ability to navigate a dynamic market,” said David C. Westgate, chairman, president and CEO of Carestream, in a statement. “Since announcing our recapitalization process in April, our lenders have remained overwhelmingly supportive, and we have worked constructively with them to complete the transaction. 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.”

Kirkland & Ellis LLP is serving as Carestream’s legal counsel while Houlihan Lokey Capital, Inc. is serving as its financial advisor, and AlixPartners, LLP is serving as its restructuring advisor. Akin Gump Strauss Hauer & Feld LLP and GLC Advisors & Co., LCC are serving as legal counsel and financial advisor, respectively, to a group of Carestream’s first lien and second lien lenders.

Carestream is a provider of medical imaging systems, X-ray imaging systems for non-destructive testing and precision contract coating services for a wide range of industrial, medical, electronic and other applications.