Arizona-based Rural/Metro. Corp., which is owned by Warburg Pincus LLC, has filed for Chapter 11 bankruptcy protection. The company has negotiated an agreement with certain creditors to help obtain new capital while reducing company debts by approximately 50 percent. The chief financial officer claimed that the proposed plan will allow the company to continue to operate during the business bankruptcy, providing firefighting and ambulance services in 21 states to approximately 700 different communities.
Rural/Metro had approximately $236.3 million in debts when the company was acquired by Warburg Pincus in 2011 for $676.5 million. Documents filed in the U.S. Bankruptcy Court on Aug. 3 reveal that Rural/Metro listed assets and debts that each exceeded more than $500 million. Those debts include unsecured notes for $308 million with Wells Fargo Bank as the trustee. Standard & Poor has issued two notes for $108 million and $200 million.
If approved, the restructuring agreement would give Rural/Metro $75 million to fund the company’s planned reorganization. The company had a hearing scheduled for Aug. 5 where they intended to seek permission to borrow up to $40 million. If the plan is allowed, all equity interests in the company will exchanged for equity in the reorganized company; however, the shares may be diluted by amounts owed to note holders that have agreed to invest $135 million once the bankruptcy is completed. The final plan must be submitted to the court by Sept. 15.
When a business is unable to make ends meet, filing for bankruptcy is one way of restructuring debts that may allow the company to continue to operate. It may be possible for a local bankruptcy attorney to help create a plan for reorganization so that the business need not close.
Source: Bloomberg Businessweek, “Warburg-Owned Ambulance Company Rural/Metro Seeks Bankruptcy“, Michael Bathon and Phil Milford, August 05, 2013