Warburg’s Rural/Metro Files for Bankruptcy Protection
By Michael Bathon & Phil Milford - Aug 5, 2013 12:01 AM ET
Rural/Metro Corp., a nationwide ambulance operator owned by Warburg Pincus LLC, filed for bankruptcy saying its plan to cut debt by about half and reorganize is supported by creditors.
The support ensures that the company will continue to provide vital emergency services, Chief Financial Officer Stephen Farber said in Chapter 11 papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware.
Under the proposed reorganization plan, secured lenders have committed $75 million of debtor-in-possession financing and bondholders promised to invest $135 million of new equity upon exit from Chapter 11, according to the filing.
Rural/Metro missed a July 15 interest payment on senior unsecured bonds due in 2019, leadingStandard & Poor’s to downgrade the debt and the corporate credit rating. The company has two bond issuances, of $200 million and $108 million. S&P estimated that holders would recover no more than 10 percent in the event of a default.
The company, based in Scottsdale, Arizona, listed assets and debt of more than $500 million each in Chapter 11 papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware.
The $200 million in bonds traded at about 59.3 cents on the dollar on July 31, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The $108 million in bonds traded at about 57.2 cents. Both had fallen more than 40 percent since May 16.
The company also has a $100 million senior secured revolving credit facility and a $325 millionterm loan. The secured debt would recover 70 percent to 90 percent in a default, S&P estimated in its July 24 report.
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 and counts FedEx Corp. (FDX), Citgo Petroleum Corp. and Textron Inc. (TXT)’s Bell Helicopter as customers.
The company was started 65 years ago when founder Lou Witzeman bought a fire truck to protect his local community after a neighbor’s house burned down, according to the site.
More than 50 affiliates of the company also filed bankruptcy petitions, including ambulance services from Pennsylvania to California.
Among the largest unsecured creditors listed in court papers are holders of $308 million in 10.125 percent notes under the trusteeship of Wells Fargo bank.
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.
The case is In re Rural/Metro, 13-11952, U.S. Bankruptcy Court, District of Delaware.
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