Rural/Metro submits plan of reorganization and disclosure statement

By Caroline Salls

Pittsburgh, Sept. 16 - Rural/Metro Corp. filed its plan of reorganization and related disclosure statement Sept. 15 with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the company reached an agreement in principle with a majority of its senior lenders and roughly two-thirds of its bondholders on a comprehensive financial restructuring plan before it filed for bankruptcy.

The proposed restructuring is designed to strengthen Rural/Metro's balance sheet by reducing its funded debt by about 50% via a conversion of some debt to equity and cutting its interest expenses in half.

According to the disclosure statement, the plan includes a rights offering that will provide $135 million in capital to the reorganized company.

The rights offering capital will be used to pay all debtor-in-possession financing claims in full in cash and fund other plan payments, including the $50 million prepayment of secured lender claims. The capital will also be used for ordinary course operations and general corporate purposes of reorganized Rural/Metro.

The company said its post-effective-date operations will also be supported by a $41.35 million exit letter-of-credit facility.

Creditor treatment

The treatment of creditors will include the following:

• DIP claims, administrative expense claims, priority tax claims and priority non-tax claims will be paid in full in cash;

• The company's senior secured credit facility will be paid down by $50 million. Holders of secured lender claims will also receive a share of a cash payment for secured lender fee claims.

Holders of claims for revolving loans will also receive a share of converted term loan obligations, and holders of term loan claims will receive a share of existing term loan obligations;

• The company's senior notes will be converted into 100% of the common stock of the holding company, subject to dilution by warrants to be issued to noteholders providing exit financing and by a management incentive plan;

• Holders of other unsecured claims will have the option to receive either a share of 100% of the new common stock or a share of other unsecured cash; and

• Existing common stock interests will be cancelled, and holders of those interests and existing securities laws claims will receive no distribution.

Rural/Metro, a Scottsdale, Ariz.-based provider of emergency and non-emergency ambulance services and private fire protection, filed for bankruptcy on Aug. 5. The Chapter 11 case number is 13-11952.

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