Rotech Healthcare Reaches Agreement In Principle With Its Major Debtholders On Debt Reduction And Restructuring

Rotech Healthcare Inc. (OTCBB: ROHI.OB) announced today that the Company and Consenting Holders holding in the aggregate a majority of the outstanding principal amount of Rotech’s 10.5% Senior Second Lien Notes have reached an agreement in principle to restructure and recapitalize the Company’s capital structure. The Company believes the agreement in principle presents an effective means to eliminate substantial secured legacy debt, which has burdened the Company for more than a decade.

Under the agreement in principle with the Consenting Noteholders, Rotech expects to complete the restructuring and recapitalization of its capital structure through a pre-arranged plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code. Rotech anticipates filing its consensual plan and petitions in the coming weeks. Because of the agreement in principle, the entire process is expected to be completed within 90 to 120 days after commencement.

Under the contemplated debt restructuring:

• The holders of the $23.5 million Term Loan would be paid in full;
• The $230 million of 10.75% First Lien Notes would be amended and the maturity potentially extended;
• The $290 million in 10.5% Second Lien Notes would be converted into 100% of the common equity of the reorganized Company, thereby eliminating this tranche of secured debt;
• All of the Company’s outstanding shares would receive a distribution of 10 cents per share (provided that the total amount paid on account of such interests does not exceed $2.62 million) and then be cancelled; and
• Trade creditors and vendors would be paid in full in the ordinary course of business as long as they maintain or reinstate existing payment terms.

“After careful planning and consideration, we are pleased to have reached this major milestone of substantially reducing our debt,” said Steven P. Alsene, President and Chief Executive Officer. “The Company has struggled for years under the debt burden placed on it when it was spun off from its former parent company in 2002. Since that time, dramatic reimbursement reductions have made it essential that we reduce our debt to a manageable level. With this debt reduction, we believe we will be able to further take advantage of our inherent strengths to grow the Company, both organically and through carefully selected acquisitions.”

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