ProSomnus has voluntarily filed for Chapter 11 bankruptcy, planning to cut its debt by 60% and inject $20 million into the company to support operations and new developments.

Summary: ProSomnus Sleep Technologies Inc has filed for Chapter 11 bankruptcy as a strategic move to restructure its finances and secure its future. The company plans to reduce its debt by 60% and has arranged approximately $20 million in new financing from existing investors. These funds will support daily operations and the development of new technologies. ProSomnus intends to continue normal business operations, including paying employees, customers, and vendors without disruption. The restructuring will also convert the company to a private entity, eliminating significant public company costs.

Key Takeaways:

  • ProSomnus has voluntarily filed for Chapter 11 bankruptcy to restructure its debt, aiming to reduce it by approximately 60% and ensure long-term financial stability.
  • The company has secured about $20 million in new financing from existing investors and lenders to support ongoing operations and future initiatives, including the development of a next-generation sensor device.
  • Despite the restructuring, ProSomnus plans to maintain normal business operations, ensuring that payments to employees, customers, and vendors continue without interruption. The restructuring will eventually privatize the company, significantly reducing its public company expenses.

ProSomnus Inc, a maker of oral appliance therapy for obstructive sleep apnea, has filed for voluntary Chapter 11 bankruptcy as part of a restructuring effort it anticipates will reduce its debt by approximately 60%.

The Pleasanton, Calif-based company has secured the support of existing investors and lenders under a plan to inject approximately $20 million of new capital into the company. Such capital will support ongoing operations and the development of strategic initiatives, including the company’s next-generation sensor device.

ProSomnus intends to retain the ability to maintain ongoing operations, including the payment of the company’s employees, customers, and vendors in the ordinary course of business during and after the restructuring.

“The voluntary restructuring announced today will enable us to move ahead as a stronger company,” says Len Liptak, chief executive officer for ProSomnus Sleep Technologies, in a release. “This very difficult decision was reached after conducting several extensive processes to identify alternatives. Reestablishing a healthy financial foundation for our company, with the support of our lenders, we expect to leave the process with more cash, less debt, less expense, and more time to focus on devices, customers and patients.”

Minimal Expected Operational Impact to the Business

ProSomnus says in a release that the terms of financial restructuring will enable the company to maintain normal business operations for customers and suppliers during and after this restructuring process. 

The company expects customers to continue experiencing quick turnaround times and predictable on-time order fulfillment. ProSomnus expects to continue purchasing supplies from vendors commensurate with demand for its devices.

Improvements to Financial Condition

The restructuring plan, which is expected to deliver an aggregate of $20 million of new capital, is being led by SMC Holdings II, LP, CETUS Capital VI, LP, Destinations Global Fixed Income Opportunities Fund, Cedarview Opportunities Masters Fund, LP, and Riverpark Strategic Income Fund, each existing lenders to and investors in the company.

Each also consented to convert the company’s current debt owed into equity upon exit from the restructuring. Further, the amount of existing senior secured debt will be reduced, and amortization of scheduled repayments will be deferred. Under the restructuring plan, the company expects to reduce its debt by approximately 60%.  

Amounts due to employees, trade creditors, vendors, and customers are not expected to be impacted by the restructuring. The completion of the restructuring plan will result in the company becoming a private company, thereby eliminating $4 million to $6 million of annual recurring public company costs and its public company obligations. 

In aggregate, the reduced public company expenses, along with the capital infusion, is expected to allow the company to direct greater resources and capital to support and grow operations as it continues to offer patients and customers an alternative to current sleep apnea treatments.

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