Direct lenders including Blackstone Inc and KKR & Co Inc are set to take control of struggling US dental services provider Affordable Care after agreeing a restructuring that will reduce the company’s debt burden by roughly 70%, according to a report by Bloomberg citing unnamed people familiar with the matter.
Under the proposed deal, lenders in the $1.4bn private credit structure will exchange their positions for a mix of instruments including a pro-rata share of a $225m first-lien second-out term loan, $200 in mpayment-in-kind notes, and full ownership of the reorganised equity. Lower-ranking creditors, including existing equity and preferred shareholders, are expected to be wiped out entirely.
The creditors are also being offered participation in a $75m new-money facility as part of the restructuring package, which is expected to be finalised and completed by the end of next month.
Blackstone and KKR have led negotiations with other participants in the credit stack, including Antares Capital and New Mountain Capital, according to sources familiar with the discussions.
Blackstone holds the largest share of the senior debt exposure, with its private credit vehicle marking down the value of the loan to below 70 cents on the dollar in recent reporting periods, reflecting ongoing stress in the underlying credit.
The restructuring underscores increasing pressure across the private credit market, where rising defaults and valuation markdowns have led to heightened scrutiny from investors and increased portfolio intervention activity by large asset managers.
Private equity sponsors Harvest Partners and Berkshire Partners originally backed Affordable Care, which was valued at approximately $2.7bn when Harvest Partners acquired its stake in 2021.
The company operates a dental services platform focused on tooth replacement solutions across roughly 425 affiliated practices in about 40 US states.
The restructuring adds to a growing list of stress cases in private credit markets, where higher interest rates and refinancing challenges have forced lenders to take more active ownership roles in underperforming assets.
Blackstone said in a prior statement that its exposure to the business represents only a small portion of its credit portfolio and that it remains focused on maximising recoveries while actively managing underperforming positions.
