Careismatic Brands: DIP-Backed Restructuring and Confirmed Chapter 11 Plan

Careismatic Brands is a supplier of medical scrubs and related apparel, with a portfolio that includes Cherokee, Dickies Medical, Infinity, Healing Hands, and Med Couture, and distribution into 75+ countries. In January 2024, the company and its affiliates filed chapter 11 cases in the District of New Jersey under a lender-supported restructuring support agreement that contemplated either a debt-to-equity recapitalization or an alternative value-maximizing transaction.

Debtor(s)	Careismatic Brands, LLC and affiliated debtors (including Careismatic Group Inc.)
Court	U.S. Bankruptcy Court, District of New Jersey
Petition Date	January 22, 2024
Judge	Hon. Vincent F. Papalia
Confirmation Date	May 31, 2024
DIP Facility	$125 million delayed-draw DIP from prepetition first lien lenders

Business Profile and Distress Drivers

Business overview. Careismatic sells medical uniforms and related apparel products to healthcare professionals and institutions. The business competes in a domestic medical scrubs market estimated around $3 billion, and it has operated an exclusive Walmart program for branded scrubs and apparel. The company's brand portfolio spans premium and mass-market segments.

Brand and channel map (selected).

Scale and logistics. Careismatic was described as having about 2,300 wholesale customers, 1,400+ vendors, and a Dallas distribution facility spanning about 1 million square feet. A U.S. wholesale market share estimate of roughly 50% was cited, and two Dallas distribution centers were referenced in connection with later workforce actions.

Ownership history. New Mountain Capital sold Careismatic to Partners Group in early 2021 and described Careismatic as an omnichannel manufacturer and seller with 15 brands and global reach in the sale announcement. The deal was valued at around $1.3 billion including debt.

Pre-filing operating pressures. The filing narrative emphasized supply chain disruption and inflationary cost pressure, including higher materials, labor, and fuel costs, supply chain delays, and rising interest rates. The same source cited a nearly 19% revenue decline from a 2021 peak.

Revenue trend. Revenue declined from $687 million in 2021 to $559 million in 2023.

Period	Reported revenue
2021	$687 million
2023	$559 million

Capital Structure and Restructuring Support

RSA and lender support. Careismatic stated the restructuring had support from 76% of first lien lenders and 70% of second lien lenders, targeted elimination of about $833 million in prepetition debt, and referenced a 120-day timeline for court confirmation. The chapter 11 process included restructuring financing to support operations during the case.

DIP financing. The DIP Motion described a $125 million delayed-draw DIP facility, with $50 million available after the interim financing order and $75 million available after the final order. Pricing was described as SOFR + 6.00%, with a 2.00% default-rate step-up. The Amended Plan defined DIP premiums: an 11.0% backstop premium, a 3.5% commitment premium, and a 3.5% exit premium, each tied to DIP commitments and generally payable in-kind. The plan provided an option for DIP lenders to convert DIP premiums into new common stock at a defined discount value based on a plan enterprise value of $325 million. The Final DIP Order authorized DIP premiums and provided adequate protection to prepetition secured parties.

Term	Summary
Facility size	$125 million delayed-draw DIP
Availability	$50 million after interim order; $75 million after final order
Interest rate	SOFR + 6.00% (default + 2.00%)
Backstop premium	11.0% of DIP commitments
Commitment premium	3.5% of DIP commitments
Exit premium	3.5% of DIP commitments
DIP-to-exit mechanics	DIP claims treated with a pro rata share of an exit term loan facility, subject to premium conversion election; alternative cash-out if an acceptable alternative exit facility is approved
Secured creditor protections	DIP liens and superpriority claims subject to carve-out; adequate protection for prepetition secured parties; section 506(c) surcharge waiver

Prepetition capital structure. The Final DIP Order recited prepetition secured obligations not less than approximately $690 million (first lien), $110 million (second lien), and $2.9 million (equipment financing) as of the petition date. Total debt at filing was around $833 million, implying additional items beyond the secured amounts recited in the DIP order.

Capital item	Amount (reported or docket-recited)	Notes
First lien obligations	≥ ~$690 million	Docket-recited minimum as of petition date
Second lien obligations	≥ ~$110 million	Docket-recited minimum as of petition date
Equipment financing obligations	≥ ~$2.9 million	Docket-recited minimum as of petition date
Total debt (reported)	~$833 million	Reported "nearly" / "approximately" at filing
Sponsor PIK notes	~$30 million	Reported in litigation filings; sponsor PIK notes in October 2022

Vendor and customer continuity. The filing announcement emphasized maintaining customer programs and vendor obligations while operating in chapter 11, including continuing customer programs. Coverage also described a critical vendor program with $21.6 million in interim-approved payments and a targeted $36 million overall.

Sale process. The Bidding Procedures Order entered in February 2024 established a bid deadline of April 3, 2024 and a sale hearing date of April 30, 2024, with intervening stalking horse and auction milestones. The order also included stalking horse bid protections (break-up fee up to 3% of purchase price and expense reimbursement), a 10% good-faith deposit (excluding any credit-bid portion), and consultation rights for key stakeholder groups, including the prepetition equipment financing lender. No buyers emerged, and the case proceeded to plan confirmation at the end of May 2024.

Milestone	Date / time (ET)	Process notes
Bid deadline	April 3, 2024 (5:00 p.m.)	Qualified bids required; 10% cash deposit (excluding credit-bid portion)
Stalking horse agreement deadline	April 10, 2024 (5:00 p.m.)	Stalking horse protections subject to order/consent requirements
Auction (if needed)	April 12, 2024 (10:00 a.m.)	Conducted only if multiple qualified bids
Objections deadline	April 22, 2024 (5:00 p.m.)	Objections to sale-related relief
Reply deadline	April 26, 2024	Reply to objections
Sale hearing	April 30, 2024 (2:30 p.m.)	Court hearing scheduled if sale pursued

Plan treatment. The Confirmed Plan implemented a debt-to-equity recapitalization that equitized senior creditor claims and established a trust mechanism for general unsecured claims. The plan was described as a debt-equity swap that eliminated $782 million of secured debt, consistent with a targeted elimination of roughly $833 million of prepetition debt.

Class / constituency	High-level plan treatment (summary)	Notes
Other secured and priority claims	Unimpaired; paid in full or reinstated
First priority claims (senior secured)	Impaired; receive 100% of new common stock
Second lien secured claims	Warrant package conditioned on class acceptance
General unsecured claims	Receive pro rata share of GUC trust net assets
Subordinated claims and existing equity interests	No recovery

Second lien warrants. The plan defined five-year warrants to purchase up to 8.5% of new common stock, with a strike price of $818 million and without Black-Scholes protection. The issuance was tied to a "Second Lien Condition" defined as acceptance of the plan by the second lien class.

GUC trust. The Confirmation Order approved a general unsecured claims trust to administer assets and distributions for holders of allowed general unsecured claims. Bankruptcy filings described a trustee with authority to reconcile (including object to) general unsecured claims and distribute net assets to holders of allowed claims, with the trust designed to wind down no later than five years after the effective date unless extended.

Post-effective claims administration. In January 2025, the court entered an Omnibus Claims Objection Procedures Order authorizing the trust to file substantive omnibus objections using Bankruptcy Rule 3007(c) and (d) plus additional grounds, with a 21-day response deadline from service and a minimum 30-day notice period before a hearing. The record later reflects a First Omnibus Objection Order (April 2025) and a Second Omnibus Objection Order (September 2025), including disallowance/expungement and reductions across categories like late-filed claims, insufficient documentation, duplicative claims, and “overstated” claims.

Post-effective claim objection milestone	Date	Summary (high-level)
Omnibus objection procedures approved	January 2025	Authorized substantive omnibus objections with defined notice/response/hearing process
First omnibus objection order	April 2025	Sustained disallowance/expungement of claim categories including late-filed, insufficient documentation, amended/superseded, duplicative, and equity claims
Second omnibus objection order	September 2025	Granted disallowance/expungement and reductions for categories including late-filed, satisfied, no-liability, overstated (reduced/allowed), insufficient documentation, and duplicative claims

Claims objection deadline extension. The trust later sought to extend the deadline to object to general unsecured claims from July 28, 2025 to the later of January 26, 2026 or 180 days after a claim is filed or amended, citing the need to make informed decisions, avoid protective objections, and ensure ratable distributions among legitimate creditors.

Release and injunction framework. The Confirmation Order approved debtor releases and found third-party releases to be consensual with opt-out mechanics and prominent disclosure, while also approving an exculpation framework that included carve-outs for actual fraud, willful misconduct, or gross negligence. The order also described an injunction framework that included a gatekeeper mechanism requiring bankruptcy court authorization before pursuing claims covered by releases or exculpation.

Contested matters. Two contested matters appeared in the docket record:

• Michelman & Robinson fee action / automatic stay extension dispute. The debtors filed a motion for declaratory and injunctive relief aimed at halting a California state-court fee action involving their sponsor and former management. Filings described the dispute as arising from prior representation (including the FIGS case) and stated that the law firm billed Careismatic entities about $39 million from 2012 through 2022 and billed over $31 million for the FIGS case alone. The debtors' stay-extension motion cited indemnification obligations, potential depletion of D&O insurance proceeds through defense costs, and the risk that alter ego or veil-piercing theories asserted by the law firm may overlap with estate causes of action.
• UCC derivative standing / lien challenge. The UCC Standing Motion sought standing to prosecute challenges on behalf of the estates against prepetition secured parties, including claims asserting certain assets were not subject to liens or were subject to unperfected liens. The motion identified categories of alleged “unencumbered” assets (including items like certain foreign equity interests, commercial tort claims, and insurance policies), and it argued that secured-party concessions in the financing order should be revisited or reserved for further investigation.

U.S. Trustee fee appeal. The UCC filed a Notice of Appeal from the confirmation order, later pursued by the GUC trust as successor. District court filings indicate the disputed issue was whether the trust would be obligated to pay quarterly U.S. Trustee fees under 28 U.S.C. § 1930(a)(6) in connection with trust liquidation and distribution activity. The appeal was dismissed after a stipulation in which the U.S. Trustee agreed it would not seek those fees from the trust once the relevant chapter 11 cases were closed.

Final decree. Post-emergence, the court entered a Final Decree closing the affiliate cases (including Careismatic Brands, LLC) and directing that remaining matters be administered in the remaining case (Careismatic Group Inc.).

Emergence. Careismatic stated it emerged on June 13, 2024, with investment funds led by Nexus Capital Management becoming the new owner and "all third-party prepetition debt" eliminated. Nexus's portfolio materials describe Careismatic as an omnichannel medical apparel business spanning 10+ brands.

The emergence announcement included an advisor roster.

Role	Advisor(s) cited in emergence announcement
Debtors’ legal counsel	Kirkland & Ellis LLP; Cole Schotz P.C.
Debtors’ investment banker	PJT Partners LP
Debtors’ financial advisor	AlixPartners LLP
Lenders’ legal counsel / banker	Milbank LLP; Houlihan Lokey

Workforce and facility changes. Careismatic planned to close two Dallas distribution centers and cut 404 positions, with an effective date of May 31, 2024.

Workforce item	Detail
Jobs impacted	404 positions
Effective date	May 31, 2024
Facilities	Two Dallas distribution centers
Addresses	35500 Lyndon B. Johnson Freeway; 4715 Mountain Creek Parkway
WARN notice date	May 2, 2024

Key Timeline

The timeline below combines ownership context, key case milestones, and major post-effective administration events.

Date	Event
June 2016	New Mountain Capital acquired majority control
January 2021	Partners Group acquired Careismatic in a deal around $1.3 billion including debt
January 22, 2024	Careismatic filed chapter 11 cases and announced a $125 million DIP
February 29, 2024	Final DIP financing order and bidding procedures order entered
April 3, 2024	Sale process bid deadline
May 31, 2024	Plan confirmed; workforce actions effective May 31, 2024
June 13, 2024	Emergence on June 13, 2024
July–August 2024	Affiliate cases closed by final decree; appeal over UST fee issue dismissed after stipulation
January 2025	Omnibus claim objection procedures approved
April 2025	First omnibus objection order entered
September 2025	Second omnibus objection order entered

Frequently Asked Questions

When did Careismatic Brands file chapter 11 and where? Careismatic Brands and affiliated debtors filed chapter 11 cases on January 22, 2024 in the U.S. Bankruptcy Court for the District of New Jersey.

What does Careismatic sell and what brands are in its portfolio? Careismatic sells medical scrubs and related medical apparel products, with brands including Cherokee, Infinity, Dickies Medical, Healing Hands, and Med Couture brand portfolio; Cherokee overview.

How much debt did the company report at filing, and what did the confirmed plan do? The filing announcement targeted elimination of about $833 million of prepetition debt. The confirmed plan was described as a debt-to-equity swap that eliminated $782 million of secured debt.

What pressures were cited as contributing to the filing? The filing was tied to supply chain disruption and cost inflation, including higher materials, labor, and fuel costs.

How much DIP financing did Careismatic obtain and what were key economic terms? The filing announcement referenced a $125 million DIP facility from prepetition first lien lenders. Bankruptcy filings described delayed-draw availability and pricing (SOFR + 6.00%, default + 2.00%), and plan-defined terms described DIP premiums (11.0% backstop premium, 3.5% commitment premium, and 3.5% exit premium) with an option to convert premiums into equity at a defined discount value.

Did the chapter 11 case include a sale process? Yes. Bankruptcy filings established a sale-process timeline with an April 3, 2024 bid deadline and an April 30, 2024 sale hearing date; no buyers emerged and the case proceeded to plan confirmation.

How were first lien, second lien, and general unsecured creditors treated? In broad terms, bankruptcy filings reflected a lender-to-owner recapitalization in which senior secured stakeholders received the new equity, second lien stakeholders received a conditional warrant package, and general unsecured creditors were routed through a GUC trust that distributes net assets to holders of allowed claims and reconciles disputed claims post-effective.

Who owned Careismatic after emergence? Careismatic stated that investment funds led by Nexus Capital Management became the new owner at emergence.

What happened after emergence—did case administration continue? Yes. Bankruptcy filings reflect final decrees closing affiliate cases and ongoing post-effective claims administration through a GUC trust, including omnibus claims objection procedures and subsequent omnibus objection orders.

Who is the claims agent for Careismatic Brands?

Donlin Recano serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more chapter 11 case coverage, visit the ElevenFlo bankruptcy blog.