Kirschner, bank reach agreement on debt structure

August 29, 1991|By Blair S. Walker

Financially strapped Kirschner Medical Corp. received a lift from Maryland National Bank in the form of an agreement to restructure $17.3 million in debt, Kirschner said yesterday.

Arrangements were also made to link a $12 million line of credit to inventory and receivables, according to Dr. C. Scott Harrison, chairman of the board, president and chief executive officer.

"Kirschner had a large amount of debt that was demand debt, which means that it could be called at any time," Dr. Harrison said. "This allowed us to restructure in such a way that we had a firm debt structure that we could work around."

The pact with Maryland National converts $17.3 million in demand debt into a term note with a maturity date of Dec. 31, 1993. The agreement is contingent upon a decrease in debt or an increase in equity as outlined in a commitment letter, Kirschner said.

Last month, the company's obligations totaled $60.5 million, compared with $49.9 million in assets.

News of the restructuring comes on the heels of profitable first- and second-quarter reports for Kirschner, a Timonium-based firm that makes and markets orthopedic implants and medical video systems.

But Kirschner had profitable first- and second-quarters in 1989 and 1990, yet lost a combined $20 million during those two years.

"There's a big, big difference between Kirschner now and those years," Dr. Harrison said. "In those years our main core orthopedic implant business did very well, but we were losing money through our operating room manufacturing subsidiary that made operating room lights and tables. That was sold in the fall of last year, and so the drain on the company is no longer there."

In May, Kirschner announced it planned to sell an office and manufacturing facility in Timonium and was closing down a medical equipment manufacturing operation in Maryland in an effort to save money.

"It is my opinion that the company had been working on this refinancing for quite a while, so this announcement does give an indication that the company is moving in the right direction," said Lawrence C. Marsh, a health-care industry analyst for Wheat First Securities Inc.

"I don't anticipate any immediate notable impact in their stated earnings, but this will allow them more flexibility to grow their business," Mr. Marsh said. "They were operating under a very capital-constrained environment, and this gives them some breathing room."

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