Invacare moves to refinance debt

Sunday, December 3, 2006

ELYRIA, Ohio - Invacare's declining profits have pushed the manufacturer out of compliance with its lenders, but the situation shouldn't affect day-to-day operations, the company stated.

"It's not a lot of fun," CFO Greg Thompson said in late November. "It is just one of those things."

Invacare revealed the violation in a Nov. 17 filing with the U.S. Securities and Exchange Commission.

Invacare officials suspected earlier this year that the company might run afoul of requirements imposed by its lenders. Specifically, as changes to Medicare policy and reimbursement battered the industry, Invacare's sales dropped off (4% in the most recent quarter), and the company eventually failed to maintain an agreed upon profit-to-debt ratio, Thompson said.
In late November, Invacare officials had begun meeting with lenders to discuss refinancing its debt.

While violating a loan covenant is "not a good thing," it has become more common as credit agreements have grown more complex," said Schuyler Hoss, president of Northwest Healthcare Management in Vancouver.

"There are strict well-defined requirements that aren't hard to violate,"
Hoss said. "Being in violation of your covenant used to be the equivalent of a person defaulting on a loan."

That is no longer the case, he said.