Accuray's Strategic Overhaul: Debt Restructuring and Governance Shifts Pave the Way for Long-Term Growth

Accuray Incorporated (NASDAQ: ARAY) has embarked on a transformative financial and governance overhaul that could redefine its trajectory in the radiation therapy market. By restructuring its debt, securing new financing, and welcoming a seasoned investor to its board, the company aims to stabilize its liquidity, reduce interest burdens, and position itself to capitalize on growth opportunities. For investors, this restructuring presents a compelling contrarian play—though risks remain, the strategic moves address near-term vulnerabilities while unlocking long-term potential.

Debt Restructuring: Balancing Liquidity and Dilution

At the core of Accuray's strategy is a $150 million senior secured credit agreement with TCW Asset Management, which replaces its prior Silicon Valley Bank debt. The new facilities—comprising a $150 million term loan, a $20 million delayed draw facility, and a $20 million revolving credit line—provide immediate liquidity to repay existing obligations. Crucially, this reduces Accuray's debt-to-equity ratio from 4.32 to a healthier level post-restructuring, easing pressure on cash flows.

However, the cost of capital is steep. Borrowings carry interest rates as high as SOFR + 8.5% (with a 2% floor), though up to 6% of interest can be capitalized, delaying principal payments. This flexibility is a double-edged sword: while it preserves cash in the short term, it risks compounding debt over time. Meanwhile, the convertible notes exchange—where $82 million in notes were swapped for shares and cash—adds 8.88 million shares to the float. Combined with warrants issued to TCW (totaling nearly 23 million shares), dilution is inevitable.

The trade-off is clear: Accuray gains $190 million in financing to fund operations and growth, but shareholders face potential equity dilution. The warrants, however, include anti-dilution protections, which adjust strike prices if Accuray's shares drop below $1.25 or $1.68. This structure aims to limit further erosion of equity value.

Governance Shifts: TCW's Influence and Steven Mayer's Role

The restructuring's governance component is equally pivotal. Steven F. Mayer, TCW's senior advisor, now sits on Accuray's board, bringing decades of experience in corporate turnarounds and board oversight. His appointment signals a strategic alignment with TCW's interests, which now include board observer seats. Mayer's track record—having served on over 30 public and private boards, including at Grifols and Cerberus—suggests a focus on operational discipline and shareholder value creation.

This shift could instill accountability in execution. For instance, the delayed draw facility's terms require Accuray to repurchase remaining convertible notes, incentivizing efficient capital allocation. Mayer's oversight may also push management to prioritize high-margin product lines, such as its CyberKnife systems, which contributed 16% revenue growth in Q3 2025.

Financial Health: Progress Amid Challenges

Accuray's financials show a company navigating recovery. Revenue grew 8% year-over-year to $113 million in Q3 2025, with product sales surging 16%, driven by strong demand for its radiation therapy solutions. EBITDA climbed to $6 million from $1.1 million, a sign of margin stabilization. Yet, gross margins dipped to 27.9% due to cost pressures, and tariffs threaten Q4 revenues by $10–$15 million. The company is pursuing exemptions, but success here will test its agility.

Risk vs. Reward: A Contrarian Opportunity?

The risks are manifold. High interest rates could strain cash flows, especially if Accuray elects to capitalize interest. Dilution remains a concern, though warrants' strike prices and anti-dilution clauses mitigate some downside. Tariffs and margin pressures pose execution risks, while Accuray's market cap of $156 million leaves little room for error.

Yet, the bull case is compelling. With $190 million in new financing and a deleveraged balance sheet, Accuray can invest in its core radiation therapy solutions, which face robust demand as cancer treatment becomes more precision-driven. The company's 8.06% revenue growth and expanding EBITDA suggest a path to profitability. Steven Mayer's governance could accelerate this by prioritizing cost discipline and strategic investments.

Investment Thesis: Buy the Dip, but Monitor Closely

Accuray's restructuring positions it to thrive if it executes on its growth roadmap. The stock, trading at a 30% discount to its 52-week high, offers a contrarian entry point for investors willing to bet on margin recovery and market share gains. However, the path is fraught with near-term risks—tariffs, interest costs, and dilution—that demand close monitoring.

For now, Accuray's moves to reduce debt, align governance, and focus on high-margin products make it a speculative but intriguing play. The jury is out on whether Mayer's influence can turn the company's potential into sustained value, but the pieces are in place for a comeback—if Accuray can navigate the hurdles ahead.