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M*Modal, a medical service that transcribes recordings of doctors’ voices for internal records, filed for protection under Chapter 11 of the bankruptcy law March 20 in order to reduce its debt, according to Reuters. The company was taken private by One Equity Partners, J.P. Morgan Chase & Co’s private-equity arm, in a $1.1 billion all-cash deal in 2012. In its bankruptcy petition, M*Modal listed between $500 million and $1 billion in liabilities.
“The acquisition was financed with a capital structure aligned with a specific set of assumptions that are no longer relevant. As a result, there is a need to restructure the company’s balance sheet to better align with changing market dynamics and refinements to our strategy,” Duncan James, M*Modal’s chief executive said in a statement.
According to a Wall Street Journal article by Tom Corrigan and Emily Glazer, credit analysts say that this “set of assumptions” became outdated as a result of increasingly sophisticated automatic transcription software, which is eliminating the need for doctors to employ more expensive human transcription – the main line of business for M*Modal.
The company was founded 40 years ago, and employs approximately 12,000 people across five countries, according to the news source. A number of M*Modal’s creditors, including Brigade Capital Management, Blackstone Group’s GSO Capital Partners and Fidelity Investments, are negotiating with the company in order to exchange their debt for equity in the restructured company.
According to Reuters, the company announced that it expects to be able to maintain liquidity through the restructuring process as a result of its cash on hand and funds generated from continued operations.
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