Carbon Health: Dual-Track Chapter 11 and Sale Process

Carbon Health Technologies, Inc. and 28 affiliated physician entities filed chapter 11 on February 2, 2026, in the U.S. Bankruptcy Court for the Southern District of Texas. The company said it reached a restructuring agreement with existing lenders that pairs a debt‑for‑equity plan with a court‑supervised marketing and sale process, a structure that keeps a plan path available if a sale for substantially all assets does not close. The filing is supported by up to $19.5 million in debtor‑in‑possession financing to fund operations during the case.

Carbon Health describes itself as a modern health chain that provides urgent and primary care through a combination of in‑person clinics and virtual access, supported by a proprietary technology stack. The business traces its origins to 2015 and built a national clinic footprint through a mix of organic expansion and acquisitions. In announcing the restructuring, the company said clinics would remain open and patients should not experience disruption to care. Bankruptcy filings describe approximately 93 clinics across eight states and a physician‑practice structure in which the management services organization supports professional entities that deliver clinical care.

Debtor(s)	Carbon Health Technologies, Inc. and affiliated physician entities (jointly administered)
Court	U.S. Bankruptcy Court, Southern District of Texas (Houston Division)
Case Number	26-90306 (lead case)
Petition Date	February 2, 2026
Business	MSO supporting urgent and primary care medical practices
Clinic Footprint	Approximately 93 clinics across eight states
Judge	Hon. Christopher M. Lopez
DIP Facility	Up to $19.5 million from Future Solutions Investments (interim authority up to $9.0 million)
Process	Dual‑track sale process and plan toggle

Dual‑Track Restructuring and First‑Day Stabilization

The chapter 11 strategy is designed to keep two paths open: a sale process for all or part of the enterprise and a plan‑based restructuring supported by the existing secured lenders. The sale track is governed by bidding procedures and milestones, while the plan track contemplates a debt‑for‑equity exchange if no sale for substantially all assets closes. The company said the objective is to preserve patient care and keep clinics operating during the marketing process while aligning the capital structure with operating cash flow.

Capital structure and liquidity triggers. Bankruptcy filings list secured term debt and clinic‑level secured obligations at the petition date, plus a material unsecured trade layer. The filings also describe liquidity constraints tied to a cost structure built for a larger enterprise, with revenue declining as pandemic‑era demand subsided. Management said 2025 revenue reductions were driven in part by deliberate clinic sales and program wind‑downs to reduce debt and right‑size the business. The filings also state that a judgment levy by RPT Realty, L.P. froze roughly $1.9 million in a Carbon Health bank account, which the company cited as the immediate liquidity shock that made chapter 11 necessary.

Equity structure. The filing materials list 137,595,516 common shares and 83,463,228 preferred shares outstanding at the petition date. The plan track envisions a debt‑for‑equity outcome supported by the secured lenders.

DIP financing and cash collateral. Judge Christopher M. Lopez granted interim authority for a secured DIP facility up to $9.0 million, with final approval sought for a total commitment of $19.5 million. Pricing is 11.5% per annum with a 3.0% default step‑up, and the facility is secured by liens on substantially all debtor assets, including accounts, contract rights, IP, and avoidance‑action proceeds (subject to typical exclusions). The DIP includes adequate protection for prepetition secured parties, a professional fee carve‑out, and a maturity tied to the earliest of key milestones, a sale of substantially all assets, the plan effective date, or six months from execution.

Milestone‑driven timeline. The DIP terms are structured around a tight case calendar. Interim financing is capped at 35 days from the petition date unless a final order is entered, and the final maturity is tied to the earliest of a plan effective date, a sale of substantially all assets, or other events of default. The milestone package includes entry of a bid procedures order, a deadline for a sale transaction, and plan‑track milestones such as disclosure‑statement approval and plan confirmation.

DIP marketing process. A Stifel‑led outreach to potential lenders began on January 26, 2026. The debtors reported no third‑party DIP offers with junior or unsecured positions because the collateral package was already fully encumbered, leaving the existing lender group as the only viable source of new money on the filing timeline.

Sale process and bid procedures. The debtors are marketing a package that includes the clinic network and CarbyOS, their proprietary technology platform. The sale process is structured for cash‑only bids with a 10% good‑faith deposit, no financing or diligence contingencies, and no bid protections such as break‑up fees. The motion preserves credit‑bid rights for the prepetition secured agent and targets a closing by March 31, 2026.

Plan track if a sale does not close. The dual‑track structure allows the debtors to pivot to a plan‑based restructuring if a transaction for substantially all assets is not achieved on the sale timeline. The company’s public restructuring announcement described a debt‑for‑equity exchange supported by existing lenders, aligning the plan track with the secured capital structure.

Balance sheet range and creditor count. Public reporting on the petition said the company listed assets and liabilities in the range of $100 million to $500 million and disclosed more than 100,000 creditors.

Operating continuity: workforce and benefits. Bankruptcy filings list roughly 1,400 U.S. employees and about 480 healthcare providers, supported by a biweekly payroll schedule for approximately 1,200 employees paid in arrears and 200 employees paid current. The first‑day motions seek authority to pay about $3.863 million in prepetition wages, benefits, and payroll‑related obligations to avoid disruption in staffing and patient services.

Cash management and banking. The debtors operate a centralized cash management system with Silicon Valley Bank as the primary depository institution. Operating accounts also fund cross‑border R&D and support functions in Turkey and Colombia.

Insurance and patient privacy. The debtors maintain approximately 15 insurance policies covering general liability, property, professional liability, cyber, and D&O. The debtors also requested patient privacy procedures to protect protected health information under HIPAA, including sealed filings for patient lists and redactions in public submissions.

Advisors and case professionals. The debtors retained Pachulski Stang Ziehl & Jones LLP as bankruptcy counsel, with Theodore S. Heckel, Maxim B. Litvak, Debra I. Grassgreen, and John W. Lucas listed as proposed counsel of record. Alvarez & Marsal North America, LLC serves as financial advisor, led by Senior Director Reilly Olson. Stifel, Nicolaus & Company, Incorporated serves as investment banker, with Managing Director Vladimir Moshinsky filing a declaration in support of the bid procedures motion.

Corporate Structure and Debtor Entities

Carbon Health Technologies, Inc. is a Delaware‑incorporated management services organization with headquarters listed at 500 East Remington Drive, Suite 20, Sunnyvale, California. Bankruptcy filings describe a structure that separates non‑clinical management and technology functions (the MSO) from the physician‑owned professional entities that deliver care. The debtors reported roughly 41 active subsidiaries and affiliates, and the joint administration motion lists 29 debtor entities (the first‑day declaration references 28 debtors, but the joint administration list includes 29). Most of the physician‑owned debtor entities are owned by Dr. Sujal Mandavia, with one entity owned by Dr. Caesar Djavaherian. The filings also list non‑debtor foreign subsidiaries in Colombia, Turkey, and the United Arab Emirates that support technology and operational functions.

The joint administration roster spans professional corporations and PLLCs in multiple states, reflecting the licensed‑physician structure used to deliver care in different jurisdictions.

Business Model and Clinic Footprint

Carbon Health operates a management services organization (MSO) that provides non‑clinical administrative support to physician‑owned entities that deliver care. Bankruptcy filings describe a structure in which most of the physician‑owned professional entities are controlled by Dr. Sujal Mandavia, with one entity owned by Dr. Caesar Djavaherian. The MSO supports urgent care, primary care, pediatrics, workplace health, and clinical research services, alongside a virtual‑care offering. The platform is supported by CarbyOS, a proprietary software system that integrates scheduling, clinical workflows, and patient engagement. The company’s public profile lists Kerem Ozkay as CEO and co‑founder Eren Bali as executive chair.

The filings list approximately 93 clinics across eight states: Texas, Washington, California, Colorado, Kansas, Missouri, New Jersey, and Massachusetts. The operating model blends walk‑in urgent care with appointment‑based primary care. In 2023, the company announced a hands‑free AI charting rollout across its clinics.

Funding, Expansion, and Acquisition History

Carbon Health’s growth story includes multiple venture‑financing rounds and a series of acquisitions that expanded its footprint. In November 2020, the company announced a Series C round of $100 million, citing growth from seven to 27 clinics across six states and plans to accelerate expansion. In July 2021, Carbon Health disclosed a $350 million funding round led by Blackstone’s Horizon platform, positioning the capital to scale an omnichannel primary‑care model that combines in‑person clinics, home‑based care, and virtual services. The expansion narrative continued in January 2023 with a Series D announcement led by CVS Health Ventures, which referenced more than 125 locations across 13 states, virtual coverage across the U.S., and a plan to pilot Carbon Health’s model in select CVS locations.

The company also expanded through clinic acquisitions and service‑line additions. In June 2021, Carbon Health announced the acquisition of Steady Health, a virtual diabetes‑care platform that it said would integrate into its omnichannel model, and it named new leaders including Myoung Cha as chief strategy officer and Nita Sommers as chief growth officer. Coverage of the transaction described the deal as a move into chronic‑condition management and data‑enabled care for diabetes patients, with terms not disclosed. The company later launched a diabetes program that it said reflected full integration of Steady Health into its care model, using CGM devices combined with in‑person and virtual visits.

Carbon Health’s clinic footprint also grew through the acquisition of regional urgent care operators. In August 2021, it announced the acquisition of Southern Arizona Urgent Care and Med7 Urgent Care, which it said brought the company to 83 clinics across 12 states. Two months later, the company said it acquired Central Jersey Urgent Care, a chain of 10 clinics in New Jersey, marking its first entry into the Tri‑State region. In April 2022, Carbon Health said it acquired MedPost Urgent Care’s California clinics, expanding its Southern California presence and bringing total clinics to 120 nationwide at the time. Earlier, the company announced it would open more than a dozen California clinics by early 2021 to deepen its state footprint.

By late 2024, Carbon Health had begun to shrink its footprint in certain markets. Community Health Systems’ Northwest Healthcare disclosed it had acquired Carbon Health urgent care centers in Arizona, indicating that some locations were sold to strategic buyers before the chapter 11 filing.

Cost Restructuring and Workforce Actions Before Chapter 11

As pandemic‑era demand receded, Carbon Health began to resize. In June 2022, the company said it laid off 250 employees, about 8% of its workforce, and indicated it was winding down certain COVID‑19‑related services. Tech press coverage at the time also reported the 8% reduction as part of a broader retrenchment in health‑tech staffing.

In early 2024, the company again reduced staffing. A San Francisco Chronicle report described a fourth round of layoffs and said the cutbacks involved dozens of medical jobs in California, citing a state filing. These workforce actions form part of the background to the 2026 restructuring, which the company said is intended to align operating costs with a smaller, more sustainable clinic base while it evaluates strategic alternatives.

Key Dates and Upcoming Milestones

The timeline below combines expansion milestones, workforce actions, and the chapter 11 process calendar. Dates tied to the sale process are proposed in court filings and subject to court approval or modification.

Frequently Asked Questions

When did Carbon Health file for chapter 11?

Carbon Health and certain affiliates filed for chapter 11 on February 2, 2026.

Where is the case pending and what is the case number?

The cases are pending in the U.S. Bankruptcy Court for the Southern District of Texas (Houston Division), with Carbon Health Technologies, Inc. as the lead debtor under case number 26-90306.

Why is Carbon Health pursuing a dual‑track restructuring?

The company said it reached a restructuring agreement that includes a debt‑for‑equity plan and a court‑supervised marketing process to sell some or all assets, allowing it to pursue a sale while preserving a plan option if a transaction does not close. The framework is described in its restructuring announcement.

What is the DIP financing package and who is the lender?

Carbon Health is financing operations through a debtor‑in‑possession facility of up to $19.5 million, with interim authority for $9.0 million. The company said the financing is provided by Future Solutions Investments.

What assets are being marketed in the sale process?

The debtors are marketing their urgent and primary care clinic network and the CarbyOS software platform, along with related business assets, under bidding procedures that require cash bids and a 10% deposit.

How does Carbon Health’s MSO model work?

Bankruptcy filings describe an MSO that provides non‑clinical administrative and operational support to physician‑owned professional entities that deliver patient care. The structure allows the medical practices to handle clinical services while the MSO provides technology, staffing, and back‑office infrastructure.

How many clinics and employees does Carbon Health have?

Bankruptcy filings list approximately 93 clinics across eight states and roughly 1,400 U.S. employees supported by about 480 providers.

What are the next milestones in the case?

The proposed sale timeline sets a bid deadline of March 6, 2026, with an auction (if needed) on March 11 and a sale hearing later in March. These dates are proposed and may be modified by the court.

Who is the claims agent for Carbon Health?

Kroll Restructuring Administration LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

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