(Updates with lawyer’s comments in third paragraph.)
Dec. 17 (Bloomberg) -- Rural/Metro Corp., an ambulance operator owned by Warburg Pincus LLC, won bankruptcy court approval of a restructuring plan that will cut its funded debt by about half.
U.S. Bankruptcy Judge Kevin J. Carey in Wilmington, Delaware, today approved the plan, which gives ownership of the reorganized company to noteholders in exchange for debt and an equity investment.
The plan “maximizes the value of the estate,” and every creditor group entitled to vote on it “overwhelmingly accepted it,” Daniel Forman, a lawyer for the company, told the judge.
Rural/Metro raised $135 million from a rights offering for 70 percent of the reorganized company’s equity and new preferred shares that was fully subscribed by noteholders, Forman said.
The company worked out a restructuring proposal before bankruptcy with a majority of its lenders and noteholders that cuts both its $735 million in funded debt and its interest expense by about half, according to court documents.
The noteholders, owed about $312.2 million, will swap their debt for a share of 30 percent of the reorganized company’s stock. Unsecured creditors have the option of sharing in the 30 percent stake in the company or receiving cash.
Secured lenders, owed about $427.3 million, will have their debt paid down by $50 million, and the rest will be converted into new loans, according to court documents. Warburg Pincus will have its existing equity stake wiped out by the plan.
Warburg Pincus, the New York-based investment firm, bought Rural/Metro in July 2011 for about $676.5 million, including $236.3 million in debt.
Rural/Metro said it sought bankruptcy protection in part because it “experienced significant challenges and disruptions operating its billing and collections functions,” which resulted in “reduced revenue and delayed cash collections.”
The company, based in Scottsdale, Arizona, listed assets and debt of more than $500 million each in Chapter 11 papers filed Aug. 4.
Rural/Metro provides ambulance and firefighting services to about 700 communities in 21 states, according to its website. The company also offers industrial fire protection services to airports, oil refineries and manufacturing plants.
The case is In re Rural/Metro, 13-bk-11952, U.S. Bankruptcy Court, District of Delaware (Wilmington).
--Editors: Charles Carter, Andrew Dunn