California-based medical scrubs distributor, Careismatic Brands LLC, and its 21 affiliates have initiated Chapter 11 bankruptcy proceedings in New Jersey. The move comes as the company grapples with the aftermath of a COVID-19-induced revenue surge, coupled with ongoing challenges in the global supply chain, escalating material costs, surging interest rates, and a challenging labor market.
Financial Turbulence Leads to Chapter 11
Careismatic Brands LLC, a prominent player in the global medical scrubs distribution sector, has officially filed for Chapter 11 bankruptcy protection in New Jersey. This drastic step follows a tumultuous period marked by a COVID-19-driven revenue spike, which temporarily buoyed the company’s fortunes before normalizing last year.
Chief Restructuring Officer Kent Percy, in a declaration issued late Monday, pointed to persistent disruptions in the supply chain, increased costs for materials, a spike in interest rates, and a challenging labor market as factors contributing to the company’s financial woes. These challenges have collectively “exacerbated significantly weaker industry-wide demand,” said Percy.
Negotiations and Restructuring Plans Unveiled
In the past two months, Careismatic Brands has engaged in negotiations with lenders to formulate a comprehensive restructuring plan. This plan, once executed, could result in a standalone recapitalization or a potential sale to a third party. The agreement, backed by $125 million of new funding, includes super-senior secured debtor-in-possession financing and exit financing.
