Rural Metro Files For Bankruptcy. Now What?

12:56 PM, Aug 6, 2013   |    comments
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BUFFALO, NY - Now that it has, as expected, filed for Chapter 11 Bankruptcy, Rural Metro, the nation's largest provider of ambulance service, is assuring communities that it will continue to provide service in their area.

Chapter 11 allows a company to continue to operate while under protection from creditors as it re-organizes its finances.

Rural Metro has contracts with several municipalities in Erie and Niagara Counties, where it operates 90 emergency vehicles, answers roughly 120,000 calls annually, and employs close to 500 workers.

In one way Rural Metro, according to one local bankruptcy attorney, is almost fortunate in that the lion's share of its debt is owed to a few institutional investors, who, according to the company, have already agreed to renegotiate the terms of the debt.

"If the number of creditors is limited to sophisticated wall street type lenders then they typically would be more likely to reach agreement and avoid a long and protracted case," said William Brown of Phillips Lytle LLP.

Indeed, Rural Metro says it has already reached an agreement with its lenders to cut its debt by about half, while receiving an additional $135 million dollars of cash infusion, leading the company to forecast that it will emerge from bankruptcy within a matter of months.

In the City of Buffalo, where Rural Metro answers up to 34,000 calls annually, the Common Council agreed, just a couple of weeks ago, to extend its existing contract through the end of the year.

Ellicott District Council Member Darius Pridgen noted that lawmakers only approved the plan once Rural Metro settled a new labor contract with Teamsters Local 375, providing wage and benefit increases for roughly 400 local EMTs.

"They didn't indicate they were in any financial trouble though," Pridgen told WGRZ-TV.

Pridgen says he'd like the company to come back before the Common Council to deliver assurances to lawmakers that it will be able to make it through bankruptcy without any disruption of service.

"We are not talking about a shoe store," said Pridgen. "We are talking about the people who save lives...and I'd like assurances that we aren't going to lose any lives."

The company, which would not provide anyone to answer questions for this story, said in a news release that it also intends to explore other options to improve its bottom line going forward.

"Under bankruptcy you're allowed to do many things, some requiring court approval," noted Brown."You can reduce your workforce, you can seek court approval to reduce pensions, and you can seek court approval to modify collective bargaining agreements with unionized employees."

This would include the one just signed locally, after the company and Teamsters 375 came to terms after an 8-hour long strike in July.

Teamsters Local 375 President Kevin Drysdale declined an interview, but told Two On Your Side: "We are aware of the company's situation and are keeping an eye on it. Our intention is to keep our hard working people employed under the terms of the new contract."

If Rural Metro is to emerge from bankruptcy in a matter of months as planned, it could be viewed as a sign the union contract may be safe.

"(To alter) collective bargaining agreements and pension agreements there's' a much more elongated process," said Brown.

The same cannot be said, though, for other agreements. "The rejection of a contract, let's say between Rural Metro and a landlord and Rural Metro and a government...well, there the process is not very long at all. It is almost always automatic in favor of the debtor."

However, Brown also noted that in cases where a company is under contract to provide emergency services, bankruptcy judges are hesitant to allow those contracts to be broken, unless and until there is a contract in place for another provider to seamlessly resume those services.

"The judge would most likely be concerned about how the service would be covered if there was no other alternative," Brown said.

Even before Rural Metro's dire financial straits came to light, the city had already begun taking steps toward issuing a request for proposal (RFP) for ambulance service for 2014 and beyond, according to Mayor Byron Brown.

While Rural Metro might be expected to be among those submitting bids, the company wouldn't talk to whether it intends to offer a proposal.

Click on the video player to watch our story from 2 On Your Side Reporter Dave McKinley and Photojournalist Scott May. Follow Dave on Twitter: @DaveMcKinley2


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