A Scottsdale, AZ-based ambulance and fire protection services company, Rural/Metro Corp., has filed for Chapter 11 bankruptcy reorganization, according to sources. Rural/Metro provides its services in 21 states, and according to sources is expected to continue doing business as usual throughout the proceedings. Rural/Metro has retained the services of a respected bankruptcy attorney to guide them through the reorganization, which will cut the company’s debt by nearly half.
Bankruptcy Attorney Guides Chapter 11 Filing
In addition to the debt forgiveness, lenders have agreed to provide $75 million in debtor-in-possession financing to cover the company’s operational expenses during the bankruptcy process.
Rural/Metro’s bankruptcy attorney says that filing Chapter 11 became a necessity as the company’s financial structure became untenable, having been designed in a different economic climate. Paying interest on outstanding debts left the company unable to invest in its current and future business, resulting in the necessity for Chapter 11 restructuring.
In addition to the financing, Rural/Metro will receive a cash infusion of $135 million, part of the agreement reached after negotiations with lenders and bondholders.
Rural/Metro is owned by a private equity firm, Warburg Pincus, which paid $438 million for the business in 2011. Its bankruptcy attorney expects the restructuring process to last until the fourth quarter of 2013, during which time the company will renegotiate its unprofitable contracts and free up capital for investing.
Chapter 11 filing should help Rural/Metro remain a viable business by restructuring its debts into a manageable payment package and enabling new investment. Rural/Metro hopes to emerge from the proceedings stronger than ever.