Medical-technology company Lensar Inc., which makes lasers used in cataract surgery, filed for chapter 11 protection Friday with a deal to hand control of the company to its senior lender while preserving more than $125 million in tax credits.
The Orlando, Fla., company’s immediate aim is to maintain a “business-as-usual atmosphere” during its chapter 11 case, Chief Executive Nicholas Curtis said in a declaration filed with the U.S. Bankruptcy Court in Wilmington, Del. Friday.
Lensar filed for chapter 11 with the backing of senior lender PDL BioPharma Inc., which says it is owed $60 million, and expects a prompt filing of a chapter 11 plan that will slash the company’s indebtedness, somewhere between $50 million and $100 million, as well as convert a portion of PDL’s debt into equity, according to a Monday press release.
PDL BioPharma is a publicly traded shell company that acquires and manages a portfolio of companies and products in the biotech, pharmaceutical and medical-device industries. PDL has committed $1.4 billion to these investments to date.
Alphaeon Corp., a California-based lifestyle health-care company, bought Lensar in 2015 in a deal valued at $59 million, but Alphaeon didn’t guarantee the debt owed to PDL
The reason for the pre-bankruptcy asset shuffling was to protect Lensar’s most valuable asset: more than $125 million in so-called net operating losses, which can be used to offset the reorganized company’s future tax liabilities, according to Mr. Curtis. Under bankruptcy law, the ability to use net operating losses to offset future taxes can disappear when there is a change of ownership.
Along with Lensar’s initial bankruptcy motions—including routine requests to continue to pay its employees and maintaining control of its bank accounts—the company is also asking the bankruptcy court to restrict trading of its shares.
“I believe that the Debtor’s NOLs are a valuable asset of its estate that, if available, could help facilitate the Debtor’s successful reorganization and serve to improve creditor recoveries,” Mr. Curtis said.
Lensar’s existing shareholders include the health-care focused private-equity firm Aisling Capital II, the Florida Opportunity Fund Inc., the state’s non-profit venture capital arm and Florida entrepreneur Randy Frey, who helped raise over $50 million in venture capital for the company.
The company, which has about 54 employees, was founded and incorporated in Delaware in 2004. Its technology uses an imaging process that converts multiple two dimensional scans into a 3-D model based on patient measurements.
Lensar said it expects its chapter 11 plan to pay all its trade vendors in full and for the case to come to a close in the second quarter of 2017.
“We look forward to working cooperatively with our vendors, suppliers and partners as we move quickly through this process,” Mr. Curtis said.
The law firm of Ballard Spahr LLP is representing Lensar and Gibson, Dunn & Crutcher is representing PDL BioPharma.
Judge Mary F. Walrath has been assigned the case. The case number is 16-12808. An initial hearing in the case is set for 9:30 a.m. Tuesday in Wilmington.
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