Exactech: RSA-Backed Going-Concern Sale Process in Chapter 11

Exactech’s chapter 11 case is a modern example of litigation-driven restructuring in the medical device sector: a going-concern operating business with a large installed base entered bankruptcy not primarily because of demand collapse, but because a recall and product liability overhang made the balance sheet difficult to finance on ordinary terms. Exactech, a Gainesville, Florida-based orthopedic implant manufacturer, filed chapter 11 on October 29, 2024 in the U.S. Bankruptcy Court for the District of Delaware while facing an expanding docket of implant-related lawsuits and a tight maturity wall on funded debt.

The case also illustrates how a sponsor-supported financing package can provide runway for a court-supervised sale and a plan that splits stakeholder problems into distinct post-effective vehicles: one path for commercial creditors and another for patient claimants. A later confirmation order describes a plan architecture that channeled personal injury and recall-related exposure into a dedicated trust, while preserving the ability to transfer operating assets to a buyer free and clear of successor liability theories that would otherwise attach to a medical device product line.

Litigation-Driven Restructuring and Sale

Exactech’s case combined recall-driven litigation overhang with near-term maturity pressure, leading to a DIP-funded sale-and-plan track that sought to preserve operations while separating product liability exposure into a dedicated trust structure.

Business Profile and Distress Drivers

Business model and why “going concern” mattered. Exactech’s core business is orthopedic implants and related surgical technology. Court filings described a product portfolio across extremities (including shoulder) and large joints (knee and hip), and also referenced the company’s “Exactech GPS” surgical guidance platform. The same filings described a large installed base and continuing operations supported by in-house manufacturing and a broad distributor and provider ecosystem, which is one reason a going-concern solution can create more value than a pure liquidation for most stakeholder groups. For a company selling implanted medical devices, “going concern” also has a practical meaning: continuity of supply, servicing, and data support for surgeons and hospitals, and a credible platform to manage ongoing recall-related obligations.

Exactech’s ownership history provided additional context for how the business was capitalized entering the litigation period. The company announced in 2017 that it had agreed to be acquired by TPG in a go-private transaction, later increasing deal consideration to $49.25 per share. Coverage later described TPG completing the take-private acquisition. That backdrop matters because it helps explain why Exactech entered the recall period with a leveraged debt stack, and why the chapter 11 case was structured as a lender- and sponsor-negotiated sale and plan process rather than a traditional unsecured-creditor-driven reorganization.

What drove the filing: packaging defect allegations, recalls, and litigation cost volatility. The core causal narrative in the bankruptcy filings is that a packaging defect and the resulting recalls created a litigation and cash cost overhang that could not be stabilized out of court. The CRO Declaration described voluntary recalls beginning in 2021 and expanding over time, tied to allegations that certain components were distributed in non-conforming packaging missing an oxygen barrier layer. In parallel, external reporting described a broad recall footprint affecting knee and hip implants and linked the defect to accelerated wear of plastic components and potential need for revision surgery.

The bankruptcy filings and press coverage converged on the same practical issue: uncertainty, rather than any single adjudicated loss, can be what breaks the capital structure. Court filings described approximately 2,600 patients filing product liability lawsuits, including centralized proceedings and cross-border claims, and described escalating costs to manage litigation and recall response. Coverage described thousands of patients in limbo and referenced the scale of pending suits in the lead-up to the chapter 11 filing. One way to read the filing drivers in this context is that exact loss amounts and ultimate claim counts were still too uncertain to finance, but the company still needed to preserve the operating platform while building a legally enforceable structure for how those claims would be processed and paid.

Beyond traditional products liability exposure, the case also included additional litigation pressure points described in external reporting. Coverage in 2025 discussed an $8 million settlement related to allegations involving defective knee implant parts, adding another data point to the company’s litigation environment, along with reporting about the settlement’s false-claims allegations. Those kinds of matters can shape stakeholder negotiations because they affect available insurance coverage, require cash payments, and complicate the narrative around product quality and compliance.

Capital Structure, DIP Financing, and Sale Process

Capital structure: why near-term maturities forced an in-court solution. Court filings described approximately $352.2 million of funded principal debt at the petition date, with a first-lien revolver and term loans and a sidecar facility, and with near-term maturities that sharply constrained runway. Selected facilities and maturities described in the CRO declaration included: a $52.18 million revolver maturing November 15, 2024; $264.92 million of term loans maturing February 14, 2025; a 2024 incremental term loan of approximately $6.55 million maturing October 2025; and a sidecar facility of approximately $28.53 million with maturity elements described around late 2024 and early 2025.

The practical restructuring implication is straightforward: even if the company could keep manufacturing and selling implants, the capital structure required immediate refinancing or a negotiated maturity extension. In a litigation-heavy fact pattern, refinancing is difficult because lenders must price in uncertain cash drains and adverse judgment risk, while maturity extensions are hard to obtain without giving lenders stronger collateral and control rights. Exactech’s chapter 11 structure demonstrates the common “solution”: provide DIP financing that primes the capital stack and imposes a court-supervised sale calendar, then embed the sale into a plan that addresses both commercial creditor claims and patient claims.

DIP financing: bridge-to-sale liquidity with lender economics and a defined carve-out. The DIP package was authorized at up to $85 million, with up to $35 million available on an interim basis and the remainder on a final basis. The Final DIP Order also referenced repayment of $6.5 million of "bridge loans" from DIP proceeds, illustrating that one function of the DIP was to refinance or clean up prepetition stopgap liquidity that was not sustainable on its own.

The DIP Motion's pricing terms show how the facility was designed to be expensive but executable in a high-uncertainty litigation setting: the stated interest rate was SOFR + 8.0% per annum subject to a 2.0% SOFR floor, with part payable in cash (SOFR + 1.0%) and part payable in kind (7.0%). The motion also described a fee stack including a backstop commitment fee of 10.0% (paid in reorganized equity of the stalking horse purchaser, or cash if the approved sale was not consummated), a 5.0% upfront/commitment fee (PIK), and a 4.0% cash exit premium (or take-back debt principal if the approved sale was consummated). A default rate of +2.0% per annum applied during an event of default.

The pricing terms described in the DIP motion combined cash and PIK interest with milestones and event-of-default triggers tied to the sale-and-plan process.

The DIP Motion's carve-out definition also matters because it signals how much the lender group was willing to allow the estate to spend on professional fees and case administration under downside scenarios. The motion defined the carve-out to include statutory fees, limited trustee fees/expenses, pre-trigger professional fees and expenses (including up to $75,000 for committee professionals), and a post-trigger professional fee cap of $3.0 million. In the context of a litigation-driven case, carve-out mechanics can determine whether the debtors and committee can meaningfully prosecute claim objections, investigate lien validity, and negotiate a trust structure for claimants once the case enters a default posture.

Sale structure: credit bid economics, capped cash components, and no break-up fee. Exactech’s sale process was designed as a credit-bid-driven transaction. The Sale Motion identified EI Bidco, LLC as the stalking horse purchaser and described a purchase price structure where the lender group would credit bid prepetition obligations and DIP obligations, while also funding limited cash components for wind-down and general unsecured creditors. The motion’s key terms table described: (i) a $2,250,000 cash wind-down amount to be used solely to fund wind-down under an agreed wind-down budget, with any remaining portion to be distributed to the stalking horse purchaser; and (ii) a $500,000 “GUC Reserve” reserved for distributions to general unsecured creditors under the plan.

Two bid-protection design choices are especially practitioner-relevant in credit-bid sales. First, the motion described that the bidding procedures did not provide a break-up fee for the stalking horse purchaser. Second, the motion described a “baseline bid” requirement that a qualifying bid must exceed the stalking horse bid by (i) expense reimbursement and (ii) $10,000,000. In a credit-bid setting, an overbid rule like this is often more economically meaningful than a standard “incremental bid” schedule because the stalking horse bidder’s “price” includes a large non-cash component (the credit bid) plus carefully bounded cash components. Requiring an incremental cushion can be intended to ensure any competing bidder offers a meaningfully higher net value to the estate rather than a structurally different bid that shifts value away from secured lenders.

Timeline: why the process extended beyond the initial bidding calendar. Early case milestones contemplated an early-2025 bid deadline and a combined sale/confirmation hearing in March 2025. That kind of plan-integrated sale timeline is common when the secured lender group wants to lock in a path to closing and avoid the “sale now, plan later” dynamic that can create leverage for unsecured constituencies. However, by mid-2025 the public narrative around the case included additional negotiation and plan development. Exactech announced a consensual agreement with the unsecured creditors’ committee and filed an updated plan in July 2025, with confirmation anticipated in early September 2025.

The docket and later press releases reflect that the case ultimately reached confirmation and sale approval later in 2025 rather than in March 2025. Exactech announced September 2025 plan confirmation and sale approval, and the court entered a confirmation order and sale order dated September 17, 2025.

Plan Mechanics and Claim Treatment

Plan mechanics: separating PI/recall exposure from commercial creditor claims. The plan record in this case is notable for how it treated personal injury and product liability claims as a distinct restructuring problem rather than as a “normal” general unsecured creditor pool. The initial Plan documents defined "personal injury claim" expansively to include a wide range of product liability and recall-related claims, including consolidated proceedings and international matters, and then classified those claims as general unsecured claims for plan classification purposes. That definition’s breadth is important in medical device cases because it emphasizes that the claim universe can include not only U.S. MDL and state-court proceedings but also foreign proceedings and other regulatory and consumer claims.

The final Confirmation Order described a structure that operationalized this separation by creating two distinct trusts that vest assets on the plan’s effective date: a settlement trust for PI/WD claims and a commercial GUC trust for commercial general unsecured claims. The order identified Ellen K. Reisman as settlement trustee and Alan D. Halperin as commercial GUC trustee and wind-down officer. It also described that the settlement trust assumes the debtors’ liabilities and responsibilities for PI/WD claims and that the commercial GUC trust assumes liabilities and responsibilities for commercial GUC claims.

This approach addresses a structural tension common in litigation-heavy chapter 11 cases: ordinary trade creditors want predictable, quick distributions and do not want their recoveries diluted by a potentially unbounded tort claim pool, while tort claimants want access to insurance rights and a credible claims resolution process that does not depend on the liquidity needs of an operating business. By shifting PI/WD claims into a settlement trust with control over insurance actions and related causes of action, the confirmed structure makes the trust (not the post-sale operating company) the “litigation-facing” vehicle.

Channeling injunction and opt-in releases: how the plan attempted to stabilize litigation. A trust-based PI resolution structure typically requires an injunction that prevents claimants from suing the reorganized debtor or purchaser directly for legacy exposure, while channeling claims to the trust and insurance assets. The Confirmation Order approved a channeling injunction as an essential means of implementing the plan and described it as narrowly tailored and necessary to implement the plan’s terms. The order also addressed third-party release mechanics: it described the third-party release as an opt-in feature where voting creditors would only grant the release if they affirmatively elected to opt in on their ballots. Exculpation carve-outs for fraud, willful misconduct, and gross negligence were also described.

The confirmation order described two related features:

• The third-party release was described as an opt-in feature, granted only by voting creditors who affirmatively elected to opt in on their ballots.
• The channeling injunction was approved to channel PI/WD claims to the settlement trust and related insurance assets rather than to the reorganized debtor or purchaser.

Sale order protections: free-and-clear, successor liability, and product-line theories. The Sale Order entered in September 2025 included explicit findings intended to protect the buyer from successor liability theories, including product-line successor liability and other successor-type claims, and it specifically referenced product liability claims among the extinguished interests. The order also found the buyer to be a good-faith purchaser within the meaning of section 363(m), which is intended to protect the sale from being unwound on appeal absent a stay.

In a medical device context, these findings are not just boilerplate. They are often a precondition to any buyer’s willingness to take the assets, because without them a purchaser can face “shadow” liability risk tied to the installed base and prior sales. The combination of a sale order that is explicit about product-line successor theories and a plan that channels PI/WD claims into a trust is a typical package used to make the transfer of a medical device business financeable and insurable post-closing.

General unsecured recoveries and why litigation claims drove the math. Even though the confirmed plan ultimately separated PI/WD exposure into a trust, the disclosure statement process highlights how litigation claims can overwhelm recoveries for traditional unsecured creditors. A March 2025 Amended Disclosure Statement summarized expected recoveries and estimated general unsecured claims at $70–$100 million with projected recovery of less than 1%, and it emphasized that contingent and unliquidated litigation-related claims could materially increase claim totals. The same disclosure statement noted that thousands of unliquidated claims drove the “less than 1%” estimate and referenced how professional fees could reduce the amount available for the GUC reserve under certain scenarios.

The Fifth Amended Plan later defined the GUC reserve as an account funded with $500,000 of cash on hand on the effective date and defined a commercial GUC trust amount of $125,000 of cash funded from cash on hand on the effective date, with the plan stating that the winning bidder did not have a reversionary interest in that commercial GUC trust amount. While these are relatively small amounts in the context of the overall capital structure, they illustrate a common feature of secured-creditor-led sales: the estate may preserve a bounded pool for commercial unsecureds, but the dominant economic outcome is driven by secured lender recovery and the handling of tort exposure through trust and insurance rights.

Financing and ownership outcome: investor-group acquisition and committed liquidity. Exactech announced in March 2025 that an investor group had been deemed the winning bidder to become the company’s new owners, with closing expected in May 2025 subject to regulatory approval. A September 2025 announcement described the new owners as including Strategic Value Partners, Stellex Capital Management, and Greywolf Capital Management, and stated that the investor group committed over $100 million of financing and that the company received approximately $150 million of total financing.

This type of financing package is a recurring feature in litigation-driven restructurings. A company with an installed base and a valuable product line can still be a viable operating business, but it needs: (i) liquidity to fund operations and remediation; (ii) a bankruptcy court order and plan structure that reduces successor liability and channels claims; and (iii) governance that can execute settlements, pursue insurance, and manage claim resolution procedures. The trust architecture in the confirmation order suggests that the “litigation management” function is not expected to live in the operating company post-effective date, even if the business itself continues.

Claims Administration and Case Governance

Claims administration: why a robust claims-and-noticing agent is central in recall cases. Cases involving thousands of patient claimants and potential recall-affected parties require a claims process that is more operationally complex than a typical trade-creditor case. Exactech sought authority to appoint Kroll Restructuring Administration LLC as claims and noticing agent in a Claims Agent Application under 28 U.S.C. § 156(c), with responsibilities including maintaining claims registers, processing and docketing proofs of claim, and providing public access to proofs of claim. In a recall-driven case, claims administration is not a back-office function; it is part of the restructuring strategy because it affects how quickly the estate can move to bar dates, how claims are categorized, and how trusts can later apply procedures to resolve claims.

Key Timeline

The docket record and public announcements provide a high-level timeline that shows how the case moved from first-day financing to a sale-and-plan confirmation structure:

Frequently Asked Questions

When did Exactech file for chapter 11 bankruptcy?

Exactech filed chapter 11 on October 29, 2024.

Where is the Exactech chapter 11 case pending, and who is the judge?

The case is pending in the U.S. Bankruptcy Court for the District of Delaware before Hon. Laurie Selber Silverstein.

Why did Exactech file for bankruptcy?

Court filings described a liquidity crisis driven by product recalls and a large product liability litigation overhang tied to allegedly non-conforming packaging missing an oxygen barrier layer. The company also faced near-term debt maturities that constrained runway while litigation exposure remained uncertain.

What recalls and alleged defects are at the center of the case?

External reporting described Exactech recalls beginning in 2021 and linked them to packaging that could cause accelerated wear of plastic components and potential need for revision surgery. The chapter 11 filings described recalls related to packaging allegedly missing an oxygen barrier layer.

How large was Exactech at the time of filing (employees and debt)?

Court filings described approximately 900 employees worldwide and approximately $352 million of funded principal debt at the petition date.

How much DIP financing was approved, and what did it fund?

The court approved an $85 million DIP facility with up to $35 million available on an interim basis. The case record also referenced repayment of $6.5 million of bridge loans from DIP proceeds.

How did the stalking horse sale work (credit bid, wind-down cash, GUC reserve, and overbid rules)?

The sale motion described a stalking horse structure centered on a credit bid of prepetition and DIP obligations, plus limited cash components including a $2.25 million wind-down amount and a $500,000 GUC reserve. The motion also described that there was no break-up fee and that a qualifying bid had to exceed the stalking horse bid by expense reimbursement plus $10 million.

How did the confirmed plan address product liability and personal injury claims?

The confirmation order described a plan that created a settlement trust to administer PI/WD claims and a commercial GUC trust to administer commercial general unsecured claims, with a channeling injunction approved as necessary to implement the plan. Earlier plan documents defined “personal injury claim” broadly to include product liability and recall-related claims, including MDL and international proceedings.

Who were the reported winning bidders/new owners, and what financing was committed?

Exactech announced that an investor group including Strategic Value Partners, Stellex Capital Management, and Greywolf Capital Management was approved as the buyer group, with over $100 million of committed financing and approximately $150 million of total financing.

Who is the claims agent for Exactech?

Bankruptcy filings identify Kroll Restructuring Administration LLC as the claims and noticing agent.

Read more ElevenFlo chapter 11 case research on the ElevenFlo blog.