Quiver Quantitative - In a bold move to save SmileDirectClub (OTC:SDCCQ) Inc. from liquidation, founders Jordan Katzman and Alex Fenkell have proposed a significant financial intervention. This comes after the once flourishing dental aligner company, trading under the ticker SDC (NASDAQ), filed for bankruptcy in late September. Despite an active search, no external buyers were found, leading the founders to step in with a rescue plan.
Katzman and Fenkell's proposal includes extending an additional $30 million in debt to SmileDirectClub, augmenting the $20 million already provided to aid the company's search for a buyer. Moreover, they are considering injecting up to $25 million of fresh equity into the business. If successful, this arrangement would grant them complete ownership of the reorganized company. A representative from SmileDirectClub confirmed that the company is collaboratively working with its founders and financial stakeholders to chart a viable way forward, with further updates expected soon.
However, this plan's success hinges on gaining approval from other lenders and lower-tier creditors. At the time of its bankruptcy filing, SmileDirectClub reported nearly $900 million in debt. A significant portion of this debt - approximately $138 million - is tied to a private credit facility managed by HPS Investment Partners, secured against the company’s receivables and intellectual property. A spokesperson for HPS declined to comment on the matter, and representatives for the founders have not yet responded to requests for comments.
The unfolding scenario at SmileDirectClub highlights the complexities and challenges faced by high-growth companies in navigating financial distress. The founders' intervention is a critical development, underscoring their commitment to the company's future. As the story progresses, the business world watches closely to see if this bold strategy can steer SmileDirectClub away from the brink of liquidation and towards a more stable path.
This article was originally published on Quiver Quantitative