A Medical Device Daily
ArthroCare (Austin, Texas) that it has entered into an agreement with One Equity Partners (OEP; New York), the global private equity investment arm of JPMorgan Chase & Co (also New York), whereby OEP will purchase $75 million of newly-issued ArthroCare Series A convertible preferred stock. ArthroCare said it intends to use the proceeds to repay the company's existing credit agreement and expects to use the remaining portion for general corporate purposes.
David Fitzgerald, ArthroCare's Acting President/CEO, said in a statement, "We are pleased to have the support of a prestigious investor such as One Equity Partners. This investment attests to the strength of our underlying business. This financing will provide ArthroCare with the resources to repay our debt and also give us additional financial flexibility to continue pursuing our plans. We look forward to working with One Equity Partners to create long-term shareholder value."
Fitzgerald took over the post after former President/CEO Michael Baker, departed the post immediately amid revelations that the company engaged in improper behavior in its insurance billing and healthcare compliance practices (Medical Device Daily, February 20, 2009).
Dick Cashin, Managing Partner of One Equity Partners, said in a statement, "We are excited to be partnering with ArthroCare, a leader and innovator in the medical device industry with a strong product portfolio. We are impressed by the strength of ArthroCare's management team and product portfolio, and we look forward to supporting the company in its next phase of growth."
OEP will purchase $75 million of newly-issued ArthroCare Series A convertible preferred stock, which will be convertible into shares of ArthroCare common stock at $15 per share, a premium over the closing price of the company's common stock on August 14, 2009 and the 30-day trading average. In connection with its investment, Chris Ahrens and Greg Belinfanti, both Partners of OEP will join ArthroCare's board.
Cumulative dividends on the ArthroCare preferred stock will be payable-in-kind at an annual rate of 3% for five years after the preferred stock is issued.
ArthroCare continues to use its best efforts to become current in its periodic reporting with the SEC and has agreed, thereafter, to file with the SEC a registration statement on Form S-1 to register the resale of the common stock underlying the newly-issued securities. Additional information regarding the OEP investment is included in the current report on Form 8-K that ArthroCare is filing with the SEC.
In other financings: VirtualHealth Technologies (Lexington Kentucky) reported it has received a payment of $100,000 for interest and restructuring fees under the terms of its Jan. 15 loan restructuring with Private Access (Irvine California).
Concurrently with the receipt of the payment, VirtualHealth agreed to revise the terms of its $1,500,000 note with Private Access to extend the maturity date from Jan. 15, 2011 until July 31, 2013. The revised note also includes an enhanced conversion premium in the event that the note is converted to equity after Jan. 15, 2011.
Additionally, the company agreed to modify its right of first refusal to purchase new securities in Private Access until its note is paid in full to create pro rata rights with other note holders of Private Access and continue to serve as collateral agent for the collateral pledged as security by Private Access to VirtualHealth and other secured parties.