WEST PALM BEACH, FL—The fate of HearUSA, one of the nation’s largest and oldest networks of audiology practices, remained up in the air this week following the West Palm Beach-based company’s voluntary filing under Chapter 11 of the US Bankruptcy Code.
Acting under section 363 of the Bankruptcy Code, HearUSA announced on May 16 that it had named William Demant as “stalking horse” bidder. That means that the Danish parent company of Oticon, Maico, Bernafon, and Interacoustics, will be able to make the first bid for HearUSA’s assets, which are estimated at $80 million. The contract with Demant requires bankruptcy court approval of auction procedures by June 6 and the completion of the auction by July 18. The hearing for approval of the sale must occur by July 19.
Demant will provide $10 million in financing for the Chapter 11 case. If it turns out to be the buyer, the debt will be assumed as part of the purchase price. However, there is no guarantee that Demant will prevail. There will be a competitive bidding process and another company might outbid Demant to acquire HearUSA.
One possible rival is Siemens Hearing, which owns 14% of HearUSA’s common stock and has been deeply involved with the publicly owned company for many years. In return for a $50 million revolving credit, HearUSA, which owns 134 hearing care centers in 10 states, has been purchasing 90% of its hearing aids from Siemens.
According to HearUSA, Siemens precipitated the bankruptcy filing by terminating the credit agreement and demanding immediate payment as the result of a dispute over proceeds from the sale of HearUSA’s Canadian business in 2009. Siemens told HearUSA that it must repay an additional $3.2 million by the end of January 2011.
HearUSA, which contended that it was current on its payments, responded by suing Siemens in New York State Supreme Court.
CEO STEPS DOWN
In the wake of HearUSA’s financial woes, Stephen J. Hansbrough has resigned as chairman and CEO, and Gino Chouinard, the president and COO, took over as interim CEO.
Chouinard said, “We believe the financing agreement with William Demant will provide the resources we need to satisfy our obligations to employees, suppliers, and customers, and to meet our obligations under our managed care contracts. We are committed to make this a seamless process for all of our stakeholders.”
In addition, because of its Chapter 11 filing, HearUSA was delisted from the American Stock Exchange. Its final closing price on May 16 was 34 cents, down from an all-time high of $67.50 in 1996.
The company reported a net operating loss of $2.6 million in 2010 on revenues of $83.5 million. In the first quarter of 2011, it reported losing $2.25 million on sales of $14.8 million. The company, which was established in 1986 as HearX, lost money during most of its 25 years.
