Rural/Metro seeks OK for assumption of restructuring support agreement

By Jim Witters

Wilmington, Del., Aug. 8 - Rural/Metro Corp. is seeking approval to assume the restructuring support agreement with its consenting lenders and consenting noteholders, according to documents filed Aug. 7 with the U.S. Bankruptcy Court for the District of Delaware.

The agreement was signed by the holders of 60% of the prepetition secured bank debt and holders of more than 75% of the prepetition unsecured bonds, the filing states.

"The RSA is the lynchpin of the debtors' consensual restructuring" and the "roadmap for the debtors' successful emergence from Chapter 11," Rural/Metro says.

Both the lenders and the bondholders "feared that a free-fall into bankruptcy would disrupt the expectations of the debtors' customer base and hamper the prospects for a successful reorganization," the filing states.

Under the restructuring agreement reached Aug. 2, the consenting lenders will provide $75 million in debtor-in-possession financing and the consenting noteholders will invest $135 million of new equity into the reorganized debtors upon emergence from Chapter 11.

"The collective goal of the parties is that the debtors can effectuate a financial restructuring with virtually no impact on day-to-day operations. The relief granted at the first-day hearing was the first step toward that goal, and the assumption of the RSA is the second," the filing states.

As previously reported, Rural/Metro was granted interim access to $40 million of the DIP facility at the Aug. 6 first-day hearing.

Agreement details

The negotiated plan is designed to "implement a comprehensive balance sheet restructuring that will solve the debtors' liquidity issues" by reducing Rural/Metro's funded indebtedness by 50% and cutting interest payments in half.

The restructuring agreement also includes, upon emergence from Chapter 11:

• A $50 million paydown of the funded prepetition senior secured credit facility;

• Amendments to the prepetition senior secured credit facility to provide financing for the reorganized company.

The amendments include an increase in the interest rate, a requirement that the debtors make an amortization payment of $25 million within eight quarters of the Chapter 11 plan effective date, the termination of all revolvers under the senior secured credit facility and an adjustment to the covenants to reflect the financial status of the reorganized debtors;

• Entry into a $42 million post-bankruptcy letter-of-credit facility that will refinance or replace all existing letters of credit under the prepetition senior secured credit facility.

The existing letters of credit will be "cash collateralized using the proceeds of a back-to-back term loan which will be senior in payment and lien priority to the prepetition senior secured credit facility;"

• Conversion of the notes on the plan effective date into 100% of the common stock of Holdings; and

• The cancellation of the prepetition equity holders' interests.

The parties also agree not to pursue an alternative plan, to support the DIP facility and to vote all claims to support the proposed Chapter 11 plan.

Agreement milestones

Milestones in the agreement include:

• Approval of the assumption of the agreement within 35 days of the bankruptcy petition date;

• The filing of a plan and disclosure statement by Sept. 15;

• Obtaining plan confirmation from the court by Dec. 20; and

• Occurrence of the plan effective date on or before Dec. 31 or, if the requirement for the confirmation order becoming final is not waived, by Jan 7, 2014.

A hearing on the motion is scheduled for 1 p.m. ET on Aug. 28.

Rural/Metro is a Scottsdale, Ariz.-based provider of emergency and non-emergency ambulance services and private fire protection. The Chapter 11 case number is 13-11952.

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