Buckling under the weight of $750 million in debt, voice recognition and medical transcription company M*Modal has filed for Chapter 11 bankruptcy protection.
[See also: M*Modal to go private in $1.1B deal]
M*Modal, which had been acquired by J.P. Morgan's One Equity Partners in a $1.1 billion deal back in 2012, filed in U.S. Bankruptcy Court for the Southern District of New York, it was announced on Thursday.
The firm plans to use the Chapter 11 process to restructure its debt to better align with its plans for the future, say company officials, who are in "constructive discussions" with lenders and bondholders, and insist that cash on hand and ongoing revenue is sufficient that operations "are expected to continue in the normal course" throughout the process.
"When M*Modal was taken private in 2012, the acquisition was financed with a capital structure aligned with a specific set of assumptions that are no longer relevant," said Duncan James, M*Modal’s chief executive officer, in a press statement. "We intend to use the court process to significantly strengthen M*Modal’s balance sheet and improve the company’s financial flexibility by reducing our debt burden and establishing a capital structure that supports our investment in the future."
With nearly 10,000 employees based in six countries around the world, M*Modal develops cloud-based clinical documentation, natural language understanding and analytic tools for some 3,800 providers.
The company owes roughly $500 million to a group of lenders led by Royal Bank of Canada, according to the Wall Street Journal. It also owes more than $250 million in unsecured notes, with US Bank as the trustee.
"Throughout this process we are not changing our operational execution or strategy, and our operations will continue as normal," said James. "Importantly, we will continue what we are known for: providing innovative technologies and offering healthcare providers a superior choice when selecting their clinical documentation and speech understanding technology partner.
"M*Modal has solid revenue, strong operating margins, cash flows consistent with industry norms, a large and growing customer base, and we are continuing to invest in the future," he said.