Rotech Healthcare Inc., a provider of home respiratory products, filed for bankruptcy saying its plan to cut debt by about half and reorganize is supported by a majority of its noteholders.
“This effort is being undertaken to fix our balance sheet and will not affect our operations,” Chief Executive Officer Steven P. Alsene said today in a statement. “Given the support of our secured stakeholders, we expect the reorganization process to conclude quickly.”
Under the proposed reorganization plan, lenders owed $23.5 million and first-lien noteholders owed $230 million will receive an amended term loan. Second-lien noteholders will get all of the shares in the new Rotech, eliminating more than $300 million in debt, according to a company statement.
The company, based in Orlando, Florida, said it had more than $100 million in assets and owes lenders and noteholders about $543.5 million. More than 100 Rotech units entered bankruptcy as well, according to the main petition filed today in U.S. Bankruptcy Court in Wilmington, Delaware.
Before the reorganization plan can be implemented, it must be approved by U.S. Bankruptcy Judge Peter J. Walsh after creditors vote.
Rotech blamed the filing on more than $500 million in debt it inherited after its 2002 spinoff from Integrated Health Services Inc., as well as cuts imposed by the federal government. The company said it has lost $1.2 billion since 2005 because of reductions in the U.S. Medicare and Medicaid programs, which pay fixed amounts for services provided to the poor and elderly.
In 2011, the company got 46 percent of its revenue from Medicare and Medicaid, according to court documents.
In March, a federal judge in Orlando issued warrants allowing government investigators to collect billing records from the company. Rotech said in court papers that it doesn’t know whether the investigation is related to $6.2 million the company repaid in May to the Medicare program for overbilling caused by a computer program.
In the 12 months ended Sept. 30, Rotech had $464.3 million in revenue, according to information compiled by Bloomberg. The company has more than 400 locations in 47 states and has about 4,000 employees.
Silver Point Finance LLC agreed to loan the company as much as $30 million to help finance the bankruptcy, according to the statement.
Rotech provides home-based equipment to help people with breathing disorders including Chronic Obstructive Pulmonary Disease. The rental and sale of oxygen and other respiratory therapy equipment made up more than 87 percent of the company’s revenue in 2011, Alsene said in an affidavit.
Rotech’s predecessor company filed for Chapter 11 protection in 2000 along with Integrated Health Services.
The case is In re Rotech Healthcare Inc., 13-10741, U.S. Bankruptcy Court, District of Delaware, (Wilmington).