Rural/Metro, the ambulance company that serves Santa Clara County's 2 million residents, on Monday filed for bankruptcy protection in a move to restructure its massive debts.
County officials said the action is not expected to affect ambulance service.
"This is what appears to be a pretty straightforward restructuring," said county Chief Operating Officer Gary Graves.
There will be no change in ambulance providers "as long as there is no change in their performance. That's the bottom line for us," Graves said.
Still, the county is working on a "plan B" should Scottsdale, Ariz.-based Rural/Metro become unable to meet its county obligations, he said. "We're always prepared for (the) worst-case scenario."
Supervisor Joe Simitian said that the county is "in good shape" and residents can expect that "when they dial 911, there's an ambulance there and pretty damn fast."
Rural/Metro took over the county's ambulance service in 2011 on a 3-2 vote by the Board of Supervisors.
Last year, the county hit the private ambulance company with $5 million in fines for a litany of issues -- including failure to have three ambulances poised to deploy, arriving late and vehicle breakdowns -- according to public records. This year it corrected those deficiencies but ran into financial difficulties, missing a $15.6 million interest payment on July 15, and was hit with downgrades of its debt.
For the new management of Rural/Metro, installed earlier this year, the filing was "good news." That's the way recently appointed President and Chief Executive Officer Scott A. Bartos described it in a statement Monday.
"We have a solution that keeps our operations moving forward while cutting our debt in half," he said. "We expect to move through this process quickly and to be a stronger, more competitive and more profitable organization."
Rural/Metro will cut its $735 million debt in half by Dec. 20 if the bankruptcy court approves of the arrangement.
Under an agreement with the majority of its senior lenders and about two-thirds of its bondholders, Rural Metro is filing under Chapter 11 of the bankruptcy code, which allows companies to continue operating while restructuring debt obligations.
The agreement reached between Rural/Metro and its creditors provides for an infusion of $75 million in new capital to fund a turnaround by the end of this year which, along with cash generated from operations, should give it enough money to restructure and continue operations, according to the company. Bondholders will inject an additional $135 million when the company exits bankruptcy protection, according to the filing.
Investors and banks that hold $308 million in notes will swap them for all of the company's equity.
The company noted that its capital structure "was created under different economic circumstances," and making payments while investing in operations "was more than the company's earnings could support."
Rural/Metro is a nationwide company with ambulance and fire protection services in 21 states and nearly 700 communities.
It was taken over by the New York private equity firm Warburg Pincus in 2011.
Contact Pete Carey at 408-920-5419 Follow him on Twitter.com/petecarey