Modivcare files for bankruptcy with more than $ 1.4 billion in debt

Diving brief:

• The medical transport company, Modivcare, filed its balance sheet in the South Texas District last week, following an effort of several months to be properly in accordance with the opposite winds.
• As part of the restructuring agreement, Modivcare plans to receive $ 100 million thanks to the financing of the debtor in possession and to reduce its debt levels by around 80%, or $ 1.1 billion. The agreement will also transfer the majority of ownership to a Modivcare investor consortium.
• Pattern received a NASDAQ cancellation notice following its bankruptcy deposit. The trading of the company’s ordinary shares will be interrupted from August 28 and Modivcare could be canceled shortly after, the company announced on Friday.

Diving insight:

Bankruptcy deposits have been raised in the health care industry in the past two years, according to Gibbins Advisors. In 2023 and 2024, labor shortages, high labor costs and the pressure of the profits of tense operators.

Although 2025 has brought less deposits, the restructuring company warned this month that the stay could be short-lived, because operators are preparing for imminent impacts of changes in federal health programs, including Medicaid cuts.

In the court documents of the first day, Modivcare’s The restructuring chief said that industry -contrary winds have tormented the medical transport company.

Modivcare provides home and on-site health services, surveillance and remote transport for non-emergency meetings. Its portfolio serves millions per year in 48 states and Washington, DC, and employs more than 23,600 employees, according to court documents.

However, a large part of Modivcare’s services involve supporting low -income patients on Medicaid.

Modivcare said that he had already undergone financial pressures related to the decline in state reimbursements for Medicaid and predicts that financial pressure will worsen next year while the Big Bill Act of Republicans are starting.

The company said that many, “if not all”, of its most important customers are considering at least the budget cuts in response to the federal health care cuts, darkening modivar expectations in terms of income in 2026.

Meanwhile, Modivcare was also affected by wider challenges, including inflation of labor costs, growing competition for customers and design changes in the Medicare Advantage plan, which, according to the company, reduced the coverage of additional advantages, such as its services.

Last year, Modivcare’s financial situation deteriorated. The operator declared a net loss of $ 201.3 million for the financial year, despite the generation of around 2.8 billion dollars in service income. To modify said it was increased by debt, including $ 1.4 billion in funded debts.

Modivcare said that restructuring is its only option. Its rotating credit facility is fully drawn and Modivcare will have a payment of $ 75 million due at the start of next year. Lawyers have described the current “unsustainable” lever ratio.

Modivcare’s restructuring aims to rationalize the portfolio and help it focus on its key initiatives – including the adoption of technology. The services should continue without interruption during the bankruptcy procedure.

“This recapitalization strengthens our assessment and allows Modivcare to accelerate our investment in innovation by combining technology and data with high members’ commitment,” said Heath Sampson, CEO and president of Modivcare, in a declaration.

Modivcare will be guided through the procedure of bankruptcy by his chief of transformation, Chad Shandler, who also advised in the highly publicized restructuring of health care of the intendants, prospect medical holdings And Beverly Community Hospital, according to documents from the first days.

The company’s share price fell by 70% After his bankruptcy announcement.