Carestream Health Inc., an X-ray imaging products supplier once owned by Eastman Kodak Co. and now backed by buyout firm Onex Corp., filed for bankruptcy with a prearranged plan to cut its $1 billion debt load by roughly half, WSJ Pro Bankruptcy reported. In recent years, Carestream’s medical films business has seen falling demand as digital-only products gain traction, Chief Financial Officer Scott Rosa said in a declaration filed Tuesday in the U.S. Bankruptcy Court in Wilmington, Del. Government efforts to curb healthcare costs have also hurt the business, which was started more than a century ago, he said. Lenders under a $448 million second-lien term loan have agreed to swap their debt for equity ownership and participate in a rights offering to become majority owners of the reorganized company, based in Rochester, N.Y. Originally formed as Kodak’s health group, Carestream was acquired in 2007 for almost $2.4 billion by investors led by Onex Corp. Yesterday’s bankruptcy filing comes four months after Carestream said it had reached an out-of-court restructuring deal expected to cut $220 million in debt. The chapter 11 filing aims to add another $250 million in debt reduction. Medical film is the largest of Carestream’s divisions. The unit includes printer systems, laser-imaging films and dental films and generated roughly half of the company’s more than $1.1 billion in sales last year. Carestream has roughly 8,000 direct customers and 900 dealers in more than 130 countries. Its products are used by health systems, hospitals and imaging centers. Its foreign entities aren’t part of the bankruptcy case. The company’s debts also include $507.7 million in first-lien term loans and $77 million in first-lien revolver borrowings, according to court papers. Lenders, including First Eagle Investments, LCM Asset Management LLC and Apollo Capital Management LP, have offered to supply an $80 million loan to help Carestream get through bankruptcy. Providers of the bankruptcy financing may also get an equity stake. First-lien lenders are getting a combination of cash and their share of a new term-loan facility of roughly $540 million, projected to provide them a full recovery. Second-lien lenders are expected to recoup 23% of what they’re owed. The restructuring plan also envisions raising up to $75 million of new equity capital through a common stock rights offering.
