M*Modal asks court to approve restructuring plan support agreement

By Caroline Salls

Pittsburgh, April 3 - M*Modal requested court approval to enter into a plan support agreement with the controlling majority of its lenders and bondholders, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the company said the financial restructuring will strengthen its balance sheet by reducing its debt by more than 55% and will establish a capital structure to support its continued investment in clinical documentation services and solutions.

With this agreement, M*Modal said it expects to complete its court-supervised restructuring within the next 120 days. Under the agreement, the plan must take effect by Aug. 15.

Creditor treatment

The proposed treatment of creditors under the plan of reorganization, which must be filed with the court by April 20, will include the following:

• Administrative claims, priority tax claims and convenience claims will be paid in full in cash;

• Holders of first-lien credit agreement claims will receive a new term loan, 93% of the stock of reorganized MModal Holdings, Inc. or one of its affiliate debtors, before dilution for stock warrants to be issued in connection with the plan and a management stock option plan, and $8.2 million in cash;

• Holders of general unsecured claims will receive 7% of reorganized holdings equity interests before dilution, warrants and $617,039 in cash, provided, however, that holders of these claims, other than noteholders, can elect to receive cash equal to a percentage of the claim to be set in the plan;

• Holders of subordinated claims will receive no distribution except to the extent the court elects not to subordinate them, in which case they will be treated as either general unsecured claims or convenience claims, depending on their size;

• Existing equity will be cancelled with no distribution for equityholders;

• Intercompany equity interests will be reinstated solely to preserve the corporate structure of the M*Modal debtors; and

• Intercompany claims will either be cancelled or reinstated, at the debtors' option.

A hearing is scheduled for April 30.

M*Modal, a Franklin, Tenn.-based provider of clinical documentation services, filed for bankruptcy March 20 in the U.S. Bankruptcy Court for the Southern District of New York. The Chapter 11 case number is 14-10701.

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