New England Orthotic and Prosthetic Systems, LLC has filed for Chapter 11 bankruptcy (case 3:17-bk-31018). The Branford, Connecticut-based company sought protection from its creditors under Chapter 11 in mid-July. The move allows New England Orthotic and Prosthetic Systems to continue operating while it looks to restructure its debt.
New England Orthotic and Prosthetic Systems has 21 locations in Connecticut, Massachusetts, New Hampshire, Rhode Island, and New York State. 12 of the locations are in Connecticut.
New England Orthotic and Prosthetic Systems provides orthotic and prosthetic patient care products and services. It offers consultation in the areas of custom-made orthotic devices, lower- and upper-extremity prosthetics, and post-mastectomy services. The company’s Cranial Orthosis segment makes custom-molded helmet for infants with hydrocephalus and craniosynostosis. The company also provides seminars and educational product demonstrations.
According to the Chapter 11 filing, the company has less than 50 creditors and assets of between zero and $50,000. The company’s book value is $19.3 million, which includes $11.8 million in intangible assets and approximately $17.3 million in liabilities.
The company said its senior debt has been acquired by the owner of a Long Island, New York-based orthotic and prosthetic retailer. Senior debt gets paid before unsecured creditors receive their money. The person who purchased the senior debt expects to merge his company with New England Orthotic and Prosthetic Systems by the end of 2017.
David Mahler, President and CEO of New England Orthotic and Prosthetic Systems, said Summer Street Partners, a private equity firm based in Buffalo, New York, forced the company to file for Chapter 11 bankruptcy protection because the firm “overextended [them]” during a 2012 recapitalization. That, along with regulatory changes governing the industry, led New England Orthotic and Prosthetic Systems to file for Chapter 11.
When one company purchases the senior debt of another, it is known as “a loan-to-own.” Just as the term implies, loan-to-own is an investment strategy used to take control of a financially distressed company.
The acquisition of secured debt usually comes at a steep discount. The company files for Chapter 11 and the investors turn its debt into a controlling interest in the company. As previously noted, the individual that purchased the senior debt plans to merge his company with New England Orthotic and Prosthetic Systems by the end of the year.
“Connecticut Bankruptcy Court Case 3:17-bk-31018,” Inforuptcy, last accessed August 2, 2017.
“New England Orthotic and Prosthetic Systems files for Chapter 11,” New Haven Register, July 31, 2017.
“NEOPS,” New England Orthotic and Prosthetic Systems, last accessed August 2, 2017.