SmileDirectClub Seeks Buyer To Avoid Liquidation

USA: SmileDirectClub Inc., a prominent dental aligner company specialising in low-cost teeth straightening treatments, has initiated a two-month search for a buyer to rescue it from financial turmoil. In the absence of a suitable bidder, the company is poised to liquidate by November 23, as stated in court documents.

The company’s founders have pledged at least $20 million to support the quest for a buyer; however, this financial lifeline offers only a limited timeframe, as confirmed in court records. Chief Financial Officer Troy Crawford affirmed in a bankruptcy court statement that SmileDirectClub would proceed with liquidation if no potential buyer emerges within the stipulated timeframe.

A spokesperson for SmileDirectClub expressed the company’s commitment to expediting the process for the benefit of all stakeholders and customers. Furthermore, the founders have extended their support by offering an additional $60 million injection into the business, contingent on specific conditions being met.

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Bankruptcy as a Strategic Option

At the time of filing for bankruptcy, SmileDirectClub carried nearly $900 million in debt, a substantial portion of which was incurred during and after the Covid-19 pandemic. Court documents reveal that approximately $138 million of this debt is tied to a private credit facility administered by HPS Investment Partners, secured by the company’s receivables and intellectual property.

While the company was on course to achieve positive free cash flow by the fourth quarter of this year, it faced challenges in securing the additional financing required to reach that milestone, as reported by CFO Troy Crawford.

Immediate Financial Struggles

In its first bankruptcy hearing, SmileDirectClub disclosed having only $5 million in available cash. To address this pressing financial need, U.S. Bankruptcy Judge Christopher Lopez granted approval for the company to borrow $20 million from its founders. The loan carries an annual interest rate of 17.5%, to be paid in-kind, as outlined in court documents. Additionally, the company may secure an additional $30 million if a potential buyer materializes, subject to passing a cash-flow assessment.

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About SmileDirectClub

Founded in 2014, SmileDirectClub has established itself as a provider of affordable teeth alignment solutions, catering particularly to lower-to-middle-income customers. Approximately 70% of its customers utilise the SmilePay financing program to acquire teeth aligners, according to CFO Troy Crawford.

SmileDirectClub is a global employer with over 1,800 employees worldwide. The company’s future remains uncertain as it embarks on this critical search for a rescuer in a challenging financial landscape.