💥New Chapter 11 Bankruptcy Filing - ModivCare Inc. ($MODVQ)💥
Healthcare oriented rideshare parks itself in chapter 11
A month or so back, on August 20, 2025, Denver-based ModivCare Inc. ($MODVQ) (“ModivCare”) and seventy affiliates (collectively, together with ModivCare, the “debtors”) filed chapter 11 prearranged cases in the Southern District of Texas (Judge Perez). We covered this sh*tco in late June …
… but to recap, the debtors are “… a leading technology-enabled healthcare services company, connecting members to essential care through [non-emergency medical transportation (‘NEMT’)], personal care services (‘PCS’), and remote patient monitoring (‘RPM’).”
Despite serving “members,” however, their revenue largely derives from public and private insurance providers — Medicaid, Medicare, managed care organizations, government agencies and insurers.
Beyond that, the debtors generate a pittance through health monitoring systems placed at brick and mortars, community health monitoring services, and a non-controlling JV interest in a company that “… maintains a national network of community-based clinicians who provide in-home and on-location services.”
Here are recent financial figs:
But notwithstanding ~$2.8b in revenue and ~$161.1mm in adjusted EBITDA, ModivCare’s stock, in the lead up to the filing, looked like one of its NEMT drivers took it straight off a cliff.
We’ll let chief restructuring transformation officer and first day declarant Chad Shandler (of FTI Consulting, Inc. ($FCN)) provide more detail:
“Despite the strength and societal importance of its platform …”
… which is, for all intents and purposes, uh, ride share …
“… ModivCare is weighed down by approximately $1.4 billion in funded debt, substantial annual interest expense, and persistent cash flow pressure. ModivCare reported a net loss of $201.3 million in 2024 and negative free cash flow of $34.0 million, and in the first quarter of 2025, revenues declined nearly 5% year-over-year, with adjusted EBITDA of $32.6 million. The Company’s revolving credit facility is fully drawn, including $75 million principal coming due and owing in January 2026, and its leverage ratio is unsustainable.”
Here are the petition date debt stack deets:*
The incremental term loan and second lien notes were issued back in Q1 this year, generating ~$105mm in new capital,** and, per Mr. Shandler, absent ‘em “… and their incremental critical liquidity, the Company may have been forced to commence these Chapter 11 Cases …” back then. We’ve heard that one before … and still don’t believe limping along for another couple quarters is anything to brag about.
Anyway, back to Mr. Shandler:
“During the first half of 2025, and through July of 2025, the Company has continued to experience operational challenges, including non-renewals from certain key customers, delays in key customer repricing, increased volume of per-member rides under shared- risk contracts[], and the Debtors’ failure to transition to fee-for-service contracts.”
In July ‘25, the debtors got active and commenced negotiations with a group of first lien lenders and second lien noteholders (the “consenting creditors”) and simultaneously looked for equity investments and to sell the PCS and RPM businesses. As you now know, neither of those went anywhere.***
But not everything was a total waste of time. The debtors filed with a restructuring support agreement (“RSA”) in hand, which, if consummated, provides a $1.1b+ deleveraging and contemplated:
📍DIP Financing. $100mm in DIP financing ($62.5mm interim), with pre-baked agreement to roll the claims into an exit term loan (the “exit TL”). The DIP bears interest at SOFR + 7% and has a backstop premium of 20% of the reorg equity (the “backstop premium”), a 2% OID fee, and a 3% exit fee.
📍Restructuring:
First Lien Claims. Holders of first lien claims will exchange their claims for up to $200mm of the exit TL and 98% of the reorg equity, subject to dilution by the DIP backstop, the equity rights offering 👇, the warrants 👇, and an 8% management incentive plan.
Second Lien Claims. Holders of second lien notes will receive for 2% of the reorg equity, subject to the same dilution, and three sets of five-year warrants to acquire 15% of the reorg equity (one 15% set at an implied enterprise value of $971mm, another at ~$1.06b, and the last at ~$1.15b), each subject to the subsequent warrants and the MIP.
General Unsecured Claims. Holders of GUCs will receive the right to purchase up to $200mm of reorg equity, at a valuation that would pay off 100% of first lien claim and 75% of second lien claims.
Equity. Each share of equity in ModivCare will receive a gluten-free 🍩.
📍Exit Revolver. The debtors have permission to enter into, but no committed financing for, a senior $250mm exit revolver … which, um, is an issue.
📍Timeline. The RSA contemplates the following timeline:****
The court held a 1.75-hour-long first-day hearing on August 21, 2025, at which all requested relief was granted, and scheduled the second-day hearing for September 16, 2025 … which was subsequently pushed to today, September 30, 2025, at 3pm CT after the official committee of unsecured creditors (the “UCC”), repped by White & Case LLP (“W&C”), popped onto the scene.
Not that accommodations bought the debtors or the consenting creditors anything. On September 23, 2025, the UCC filed an archetypal W&C DIP objection, including this bombastic assertion:
“… [T]he Backstop Premium is worth $154.9 million assuming an illustrative total enterprise value of $1.2 billion (the approximate sum of the first and second lien debt that participated in the Debtors’ March 2025 liability management transaction), and potentially much more if the Debtors’ business proves to be more valuable.”
Which, we get it, valuation hasn’t been proven (yet), but the debtors’ 1Q’25 10-Q suggested, nearly five months ago when the second lien notes totaled ~$301.2mm, that ~$155mm value ☝️ is more horsesh*t than “illustrative”:
“As of March 31, 2025, the fair value of the Second Lien Notes was $120.5 million …”
The UCC’s math ain’t gonna math (PETITION NOTE: the day before the hearing, on September 29, 2025, the debtors and the consenting creditors***** filed replies — and a revised proposed final DIP order).******
Regardless, folks can hash it out with Judge Perez later today. Thereafter, the disclosure statement (the “DS”) hearing is slated for October 6, 2025 at 9am CT, which is an irrelevant couple days after the timeline ☝️. In any event, who knows if the date will stick; before long, the UCC will object.
Not that it will receive the honors of being first. On September 29, 2025, Christopher Skrypski (the “proposed lead plaintiff”), on behalf of himself and a proposed class of duped shareholders, filed an objection to the DS. Back in January ‘25, ModivCare, CEO Heath Sampson, NEMT-segment CFO Kenneth Shephard, and debtor-wide CFO Barbara Gutierrez (together with Messrs. Sampson and Shepard, the “non-debtor defendants”) were sued for making false and misleading statements to investors that inflated the share price,******* and because the RSA-documenting plan contains a third-party release of ‘em, the proposed lead plaintiff poses a simple question:
Would any rational, fully informed Class Member ever voluntarily release direct claims against the insured Non-Debtor Defendants, their only potential source of recovery, in exchange for absolutely nothing?
So, in addition to asking for class lit-focused disclosures, the objector requests that the class be carved out of the release or the proposed lead plaintiff be permitted to opt out for everyone.
The debtors are represented by Latham & Watkins LLP (Ray Schrock, Keith Simon, George Klidonas, Betsy Marks, Jonathan Weichselbaum, Montana Licari, Meghana Koenitzer, Nikhil Gulati, Brian Herskowitz, Esteban Woo Kee) and Hunton Andrews Kurth LLP (Timothy “Tad” Davidson II, Catherine Rankin, Brandon Bell) as legal counsel, FTI Consulting, Inc. ($FCN) (Chad Shandler) as financial advisor and CRO, and Moelis & Company LLC ($MC) (Zul Jamal) as investment banker. The debtors’ “strategic alternatives committee” is composed of Alec Cunningham, Erin Russell, and Daniel Silvers, and Mr. Silvers composes its special committee, which is represented by Quinn Emanuel Urquhart & Sullivan LLP (Susheel Kirpalani) as legal counsel. The first lien agent, which is currently JPMorgan Chase Bank, N.A. ($JPM), but “… will be replaced by Wilmington Trust National Association" and the consenting creditors are represented by Paul Hastings LLP (Kris Hansen, Matt Warren, Lindsey Henrikson). Wilmington Savings Fund Society, FSB, as second lien notes trustee, is represented by Winston & Strawn LLP (Jonathan Levine, Tom Good, Emma Fleming, Madison Haueisen). The UCC is represented by W&C (Scott Greissman, J. Christopher Shore, Jason Zakia, Andrew Zatz, Gregory Pesce, Charles Koster) as legal counsel and AlixPartners LLP (David MacGreevey) as financial advisor. The proposed lead plaintiff is represented by Lowenstein Sandler LLP (Andrew Behlmann, Michael Papandrea, Lindsay Sklar) and Levi & Korsinsky LLP (Gregory Potrepka, Shannon Hopkins) as legal counsel.
*The debtors also have ~$123.9mm in trade claims outstanding.
**Kirkland & Ellis LLP represented the debtors in connection with those debt issuances, but Latham & Watkins LLP’s Ray Schrock was able to snake the restructuring work.
***In FY’24, PCS and RPM reported $2.1mm and $1.8mm in operating income before giving effect to a $105.3mm impairment of the latter’s goodwill. FY’25 ain’t off to a great start either; for 1Q’24, PCS reported $2.3mm in operating income, while RPM had, 😬, ($1.0mm).
****The debtors filed the disclosure statement and plan on September 4, 2025. Nothing special about either: they document the RSA deal.
*****Feel free to file a 2019 statement any time.
******We won’t comment on the rest of the objection. Other beefs are more reasonable (e.g., the debtors’ borrowing interest-accruing cash now to escrow professional fees, case timeline) or at least understandable (e.g., the cap on UCC fees only). Others are vanilla UCC fodder we’d have said “no” to too (e.g., no DIP liens on unencumbered assets).
*******Discovery in the underlying lit hasn’t commenced, so we ain’t gonna comment on the allegations. Regardless, the DS objection resonates.
Company Professionals:
Legal: Latham & Watkins LLP (Ray Schrock, Keith Simon, George Klidonas, Betsy Marks, Jonathan Weichselbaum, Montana Licari, Meghana Koenitzer, Nikhil Gulati, Brian Herskowitz, Esteban Woo Kee) and Hunton Andrews Kurth LLP (Timothy “Tad” Davidson II, Catherine Rankin, Brandon Bell)
Financial Advisor and CRO: FTI Consulting, Inc. ($FCN) (Chad Shandler)
Investment Banker: Moelis & Company LLC ($MC) (Zul Jamal)
Special Committee: Daniel Silvers
Legal: Quinn Emanuel Urquhart & Sullivan LLP (Susheel Kirpalani)
Claims Agent: Verita (Click here for free docket access)
Other Parties in Interest:
Consenting Creditors and First Lien Agent
Legal: Paul Hastings LLP (Kris Hansen, Matt Warren, Lindsey Henrikson)
Second Lien Notes Trustee: Wilmington Savings Fund Society, FSB
Legal: Winston & Strawn LLP (Jonathan Levine, Tom Good, Emma Fleming, Madison Haueisen)
Proposed Class Plaintiff: Christopher Skrypski
Legal: Lowenstein Sandler LLP (Andrew Behlmann, Michael Papandrea, Lindsay Sklar) and Levi & Korsinsky LLP (Gregory Potrepka, Shannon Hopkins)
Official Committee of Unsecured Creditors
Legal: White & Case LLP (Scott Greissman, J. Christopher Shore, Jason Zakia, Andrew Zatz, Gregory Pesce, Charles Koster)
Financial Advisor: AlixPartners LLP (David MacGreevey)