SmileDirectClub, which filed for bankruptcy in September and started a search for a new buyer for the clear aligner company, is talking with its creditors and founders to rescue it from liquidation, according to a story published on December 5 in the Middlemarket.
With no new buyer emerging by the agreed-upon deadline of November 23, SmileDirectClub founders Jordan Katzman and Alex Fenkell have offered to infuse new cash into the company and take it over, according to the story.
The pair has proposed offering $30 million of debt to SmileDirectClub, as well as adding $25 million of new equity into the company in exchange for the founders receiving 100% of the reorganized firm. This $30 million would be in addition to the $20 million that Katzman and Fenkell lent the company to pay its hunt for a new buyer, according to the story.
For this deal to move forward, SmileDirectClub needs to get its other lenders and creditors to agree to the proposal. When SmileDirectClub filed for voluntary protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas on September 29, SmileDirectClub had almost $900 million in debt.
On October 4, SmileDirectClub was delisted from the Nasdaq Stock Market, and the trading of its common stock was suspended. The stock exchange delisted the company under Nasdaq rules, its use of discretionary authority, and SmileDirectClub's bankruptcy and liquidation.
SmileDirectClub’s money problems came nearly four years after it raised more than $1 billion in its initial public offering and months after facing some legal hits.
In August, a California court confirmed an order requiring the orthodontics company to pay $63 million to Align Technology, a former partner and the maker of Invisalign, over a supply agreement dispute. SmileDirectClub had planned to appeal the decision. In June, it settled a suit with the Washington, DC attorney general’s office, which claimed the company made injured and dissatisfied customers sign nondisclosure agreements (NDAs) to receive refunds for their clear aligner therapy.
Under the terms of the settlement, SmileDirectClub was required to release 17,000 U.S. consumers from provisions in its NDAs. Also, the company had to change its refund policy, notify consumers who previously signed NDAs that they could now freely speak about their experiences, and stop forcing people to sign NDAs that prevented them from sharing information before refunds were provided.