Stimwave Technologies Inc.
FILING ALERT: Medical Device Manufacturer Stimwave Technologies Files Chapter 11 in Delaware to Sell Assets With Existing Lender and Proposed DIP Lender Kennedy Lewis as Stalking Horse
Wed 06/15/2022 15:00 PM
Stimwave Technologies Chapter 11 Filing from Reorg's First Day team.
Relevant Documents:
Voluntary Petition
First Day Declaration
DIP Financing Motion
Press Release
Stimwave Technologies Inc., a Pompano Beach, Fla.-based medical device manufacturer and provider of permanently implanted neurostimulation products for chronic pain, filed for chapter 11 protection today in the Bankruptcy Court for the District of Delaware, along with subsidiary Stimwave LLC. The company reports $50 million to $100 million in assets and $10 million to $50 million in liabilities. The debtors are represented by Gibson, Dunn & Crutcher and Young Conaway Stargatt & Taylor as counsel, Honigman as special counsel, Riveron as financial advisor and GLC Advisors as investment banker. Kroll Restructuring Administration is the claims agent. The jointly administered case number is 22-10541. The case has been assigned to Judge Karen B. Owens.
According to the first day declaration of chief executive officer Aure Bruneau, Stimwave filed for chapter 11 protection to run a sale process with existing lender Kennedy Lewis as stalking horse, which would also provide $40 million in DIP financing. The stalking horse bid is a credit bid of the entire amount of its prepetition and DIP loans.
The DIP financing is conditioned on the following milestones:
The debtor’s prepetition capital structure includes a term loan agreement with Kennedy Lewis Capital Partners Master Fund LP as lender and Kennedy Lewis Investment Management as collateral agent, with the following outstanding amounts, as well as $2.5 million in unsecured trade debt:
Among other events of default, the debtors note a Department of Justice investigation pursuant to the False Claims Act. The debtors filed a related complaint in the Delaware Chancery Court in 2019 against former CEO Laura Perryman alleging that she breached her fiduciary duties to the debtors including that she “directed accounting staff to make changes to the accounting system and remove invoice references on checks with Wite-Out [ ] and photocopying so that invoices selected by the auditors for their revenue sample would appear to have been paid when, in fact, those invoices had not been paid.” The debtors further allege that Perryman used company assets to pay for her son’s apartment, to further her personal interest and pay bonuses to close friends.
Despite financial performance on an “improving trajectory” since Perryman’s resignation, the company says that its “liquidity position has remained strained as a result of the difficulties the Company faced in raising new capital due to stockholder voting rights agreements, ongoing operating losses, the impact of the DOJ investigation, substantial legal expenses from litigation, and the COVID-19 pandemic.”
The company issued a press release today, in which Bruneau says “We are excited about the continued growth we have experienced over the last two years, during a challenging time. We are grateful for our customers’ partnership and the positive impact our therapy provides for their patients. The sale process we are undertaking will have an efficient and prompt exit, while we maintain our day-to-day commitment to meet our customers’ and patients’ support needs with the high standards of quality they expect from us.”
Reorg First Day will provide a full summary once the first day briefing is complete.
Relevant Documents:
Voluntary Petition
First Day Declaration
DIP Financing Motion
Press Release
Stimwave Technologies Inc., a Pompano Beach, Fla.-based medical device manufacturer and provider of permanently implanted neurostimulation products for chronic pain, filed for chapter 11 protection today in the Bankruptcy Court for the District of Delaware, along with subsidiary Stimwave LLC. The company reports $50 million to $100 million in assets and $10 million to $50 million in liabilities. The debtors are represented by Gibson, Dunn & Crutcher and Young Conaway Stargatt & Taylor as counsel, Honigman as special counsel, Riveron as financial advisor and GLC Advisors as investment banker. Kroll Restructuring Administration is the claims agent. The jointly administered case number is 22-10541. The case has been assigned to Judge Karen B. Owens.
According to the first day declaration of chief executive officer Aure Bruneau, Stimwave filed for chapter 11 protection to run a sale process with existing lender Kennedy Lewis as stalking horse, which would also provide $40 million in DIP financing. The stalking horse bid is a credit bid of the entire amount of its prepetition and DIP loans.
The DIP financing is conditioned on the following milestones:
The debtor’s prepetition capital structure includes a term loan agreement with Kennedy Lewis Capital Partners Master Fund LP as lender and Kennedy Lewis Investment Management as collateral agent, with the following outstanding amounts, as well as $2.5 million in unsecured trade debt:
Among other events of default, the debtors note a Department of Justice investigation pursuant to the False Claims Act. The debtors filed a related complaint in the Delaware Chancery Court in 2019 against former CEO Laura Perryman alleging that she breached her fiduciary duties to the debtors including that she “directed accounting staff to make changes to the accounting system and remove invoice references on checks with Wite-Out [ ] and photocopying so that invoices selected by the auditors for their revenue sample would appear to have been paid when, in fact, those invoices had not been paid.” The debtors further allege that Perryman used company assets to pay for her son’s apartment, to further her personal interest and pay bonuses to close friends.
Despite financial performance on an “improving trajectory” since Perryman’s resignation, the company says that its “liquidity position has remained strained as a result of the difficulties the Company faced in raising new capital due to stockholder voting rights agreements, ongoing operating losses, the impact of the DOJ investigation, substantial legal expenses from litigation, and the COVID-19 pandemic.”
The company issued a press release today, in which Bruneau says “We are excited about the continued growth we have experienced over the last two years, during a challenging time. We are grateful for our customers’ partnership and the positive impact our therapy provides for their patients. The sale process we are undertaking will have an efficient and prompt exit, while we maintain our day-to-day commitment to meet our customers’ and patients’ support needs with the high standards of quality they expect from us.”
Reorg First Day will provide a full summary once the first day briefing is complete.
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