Radiology provider Akumin announced that it has filed for Chapter 11 bankruptcy protection in a bid to eliminate a debt of $470 million, as reported by Radiology Business. Akumin’s approach is to convert this debt into common shares of the company’s stock, which will be owned by their lender, Stonepeak. As part of this restructuring, Akumin will transition from a publicly traded entity to a privately held company, bolstered by an infusion of $130 million in new investment from Stonepeak.
The decision marks the conclusion of a period of financial turmoil for Akumin, which saw the value of its stock plummet by more than 80% in the past year. This crisis was exacerbated by lingering debt stemming from the acquisition of Alliance Healthcare Services in 2021, which cost the company $820 million. Akumin also had to contend with a recent ransomware attack that temporarily halted its diagnostic operations.
As part of the restructuring agreement, Akumin and Stonepeak have worked closely with bondholders and revolving-credit lenders. In addition to the conversion of debt to stock, Akumin’s senior secured notes, maturing in 2025, will be replaced with new ones carrying higher interest rates and due by August 1, 2027. The company’s existing stockholders are set to receive $25 million and certain “contingent value rights” for their shares.
“Today’s announcement marks the successful culmination of a thorough strategic review process to ensure we have the right capital structure in place to support our long-term success,” Akumin Chairman and CEO Riadh Zine said in an October 20 announcement. “As a result of this transaction, Akumin will move forward as a private company with increased financial flexibility and a strengthened balance sheet, better positioned to execute on our strategic plan to become the outpatient partner of choice for hospitals and health systems.”
The bankruptcy process is anticipated to conclude after receiving regulatory approvals. It is expected to secure court approval within the next 45 days.
Akumin’s decision to file for bankruptcy comes after they received written notice from the Nasdaq that the exchange will suspend trading of the company’s common stock on October 26. This decision was made due to Akumin’s inability to maintain the minimum $2.5 million in stockholders’ equity, among other violations. The company has advised against trading its stock during the bankruptcy process, citing significant speculative risk.
Akumin’s decision to restructure and focus on long-term success aims to position them for growth and financial sustainability in the healthcare sector. This move also follows a similar step taken earlier in the year by Envision Healthcare, another major radiology provider that filed for bankruptcy to cancel approximately $5.6 billion in debt, further highlighting the financial pressures within the industry.
