ArthroCare to use funding for general corporate purposes after retiring debt

Sep 2 2009

ArthroCare Corp. (Pink Sheets: ARTC) today announced that it has closed its previously announced financing with One Equity Partners (OEP), the global private equity investment arm of JPMorgan Chase & Co.

In connection with the financing, OEP has purchased $75 million of newly-issued ArthroCare Series A Convertible Preferred Stock, which will be convertible into shares of ArthroCare common stock at $15.00 per share, a premium over the closing price of the Company’s common stock on August 14, 2009 and the 30-day trading average. Cumulative dividends on the ArthroCare preferred stock will be payable-in-kind at an annual rate of 3.0% for five years after the preferred stock is issued, and a make-whole adjustment will apply if OEP elects to convert its shares before September 2014. Upon the close of the transaction today, and in conjunction with OEP’s investment, Chris Ahrens and Greg Belinfanti, both Partners of OEP, will join ArthroCare’s Board of Directors.

Mr. Ahrens, age 33, is a Managing Director of OEP and, prior to joining OEP in 2001, worked at Goldman Sachs. He currently serves on the Boards of Carlson Wagonlit Travel, Systagenix Wound Management, Travel Leaders Group and Vertrue. Mr. Ahrens received his A.B. from Princeton University.

Mr. Belinfanti, age 34, is a Managing Director of OEP and, prior to joining OEP in 2006, served as a Vice President in the Investment Banking division of Lehman Brothers, specializing in Global Healthcare. Mr. Belinfanti serves on the Boards of Apollo Health Street, Prodigy Health Group and Systagenix Wound Management. Mr. Belinfanti received his B.A. from New York University and his J.D. from Harvard Law School.

In conjunction with the closing of the financing, ArthroCare has repaid all obligations under the Company’s Credit Agreement and expects to use the remaining portion of the proceeds for general corporate purposes. Additionally, all rights and obligations under the Credit Agreement are being terminated and all security interests and other encumbrances are being released, other than the Company’s obligations with respect to a letter of credit issued in favor of a lender affiliate under the Credit Agreement in the amount of €750,000, which will be cash collateralized in the approximate amount of $1.4 million.