Rotech Healthcare Inc. is back in business.
The Orlando, Fla.-based firm has completed its financial restructuring and emerged from Chapter 11 bankruptcy protection.
A five month restructuring process enabled Rotech to substantially deleverage its balance sheet, reducing its outstanding debt by more than $300 million and lowering its annual cash interest expense from $60 million to less than $20 million.
“Today marks a new beginning for Rotech,” President and CEO Steven P. Alsene said. “With the financial restructuring behind us, we have the increased financial flexibility, which we believe will allow us to compete aggressively in today’s home medical equipment market. Our brief restructuring would not have been possible without the support of our lenders, creditors, suppliers, customers and especially our employees.”
Proskauer Rose, LLP serves as the company’s legal advisor, Barclays as financial advisor and AlixPartners as restructuring advisor.
Wachtell Lipton Rosen & Katz serves as legal advisor to each of the consenting noteholders holding second lien secured notes.
Rotech emerged from bankruptcy nearly six months after filing for Chapter 11 protection. Under the reorganization plan proposed by executives in early April, lenders owed $23.5 million and first-lien noteholders owed $230 million would receive an amended term loan. Second-lien noteholders wouldl get all of the shares in the new Rotech, eliminating more than $300 million in debt, according to a company statement.
At the time it filed for bankruptcy, the firm had more than $100 million in assets but owed 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, Del.
Inherited Debt
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 received 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 to the Medicare program for overbilling caused by a computer program.
In the 12 months ended Sept. 30, 2012, Rotech had $464.3 million in revenue, according to information compiled by Bloomberg.
Bankruptcy Loan
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 (COPD). 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.
Rotech Healthcare is one of the largest providers of home medical equipment and related products and services in the United States, offering both respiratory therapy and durable home medical equipment and related services. The company provides home medical equipment and related products and services principally to older patients with breathing disorders, such as chronic obstructive pulmonary diseases (COPD), which include chronic bronchitis, emphysema, obstructive sleep apnea and other cardiopulmonary disorders. Rotech provides equipment and services in 49 states through approximately 420 operating locations located primarily in non-urban markets.