Healthcare transportation giant serving millions seeks to slash leverage while maintaining operations for vulnerable populations
ModivCare Inc., one of the nation's largest providers of non-emergency medical transportation and in-home care services, filed for Chapter 11 bankruptcy protection on Tuesday with a pre-arranged restructuring plan that would slash its debt burden by approximately $1.1 billion.
The Denver-based company, which serves millions of Medicaid and Medicare members across 48 states, filed petitions in the U.S. Bankruptcy Court for the Southern District of Texas under case number 25-90309. ModivCare plans to reduce its total funded debt from approximately $1.4 billion to roughly $300 million upon emergence from bankruptcy, according to a first-day declaration filed by Chief Transformation Officer Chad J. Shandler.
The restructuring comes with substantial creditor support, with holders of approximately 90% of the company's first lien facility and 70% of its second lien notes backing the plan through a restructuring support agreement executed on the same day as the bankruptcy filing.
Essential Services Under Pressure
ModivCare operates critical healthcare infrastructure, coordinating approximately 36.8 million transportation trips annually for 29.5 million average monthly members through its non-emergency medical transportation (NEMT) segment. The company also provides personal care services through 14,000 caregivers across seven states and remote patient monitoring services to approximately 247,000 members.
Despite generating approximately $2.79 billion in service revenue and $161.1 million in adjusted EBITDA in 2024, the company reported a net loss of $201.3 million and negative free cash flow of $34.0 million. First-quarter 2025 results showed continued deterioration, with revenues declining nearly 5% year-over-year to $650.7 million.
"ModivCare's services are engrained in the everyday lives of vulnerable populations," Shandler stated in his declaration. "Through these services, ModivCare plays a critical role in supporting healthcare access and addressing social determinants of health for some of the nation's most at-risk communities."
Industry Headwinds and Regulatory Pressure
The filing highlights significant industry-wide challenges that contributed to ModivCare's financial distress. The company faces pressure from regulatory changes including the One Big Beautiful Bill Act, the Budget Control Act of 2011, and the American Rescue Plan Act of 2021, which have resulted in reduced Medicaid funding and Medicare payment cuts.
Additionally, the company has grappled with labor cost inflation, increased competition from regional and technology-driven entrants, and customer de-risking as counterparties became increasingly concerned about the company's financial stability. Changes in Medicare Advantage plans have also reduced supplemental benefits, further pressuring revenues.
The company's financial challenges were exacerbated by its growth strategy, which included several major acquisitions between 2020 and 2022, including National MedTrans, OEP AM Inc. (d/b/a Simplura Health Group), and Guardian Medical Monitoring. While these acquisitions expanded ModivCare's service offerings, they also significantly increased the company's debt burden.
Restructuring Plan and Timeline
The restructuring plan provides for a $100 million debtor-in-possession financing facility, backstopped by consenting first lien lenders, to fund operations during the bankruptcy process. Upon emergence, all outstanding DIP loans and claims will convert to term loans under a new exit facility.
Consenting first lien lenders will exchange their claims for up to $200 million of an exit term loan facility and 98% of the reorganized company's equity. Second lien noteholders will receive 2% of the equity, while unsecured noteholders and other general unsecured creditors will have the opportunity to participate in an equity rights offering of up to $200 million.
The company has also secured the ability to enter into a $250 million exit revolving credit facility, including a $150 million sublimit for letters of credit, which are frequently required by contract counterparties and may improve free cash flow by reducing current collateral requirements with surety providers.
ModivCare has established an aggressive timeline for the restructuring, targeting emergence within 110 days of the petition date. Key milestones include filing the reorganization plan within 15 days, obtaining final DIP approval within 45 days, and achieving plan confirmation within 90 days.
Maintaining Operations
Throughout the bankruptcy process, ModivCare expects to continue operating without disruption to customer services. The company filed numerous "first day" motions seeking court approval to maintain essential business operations, including paying employee wages and benefits, honoring customer obligations, and maintaining relationships with critical vendors.
Shandler, who was appointed Chief Transformation Officer on January 9, 2025, previously served as a Senior Managing Director at FTI Consulting, where he provided financial advisory services to ModivCare beginning in November 2024. His appointment was part of governance changes required under amendments to the company's credit agreements.
Prior Restructuring Efforts
Before filing for bankruptcy, ModivCare attempted several out-of-court solutions to address its financial challenges. In January 2025, the company secured $75 million in new first lien debt through a fifth amendment to its credit agreement and raised an additional $30 million through second lien notes in March 2025. The company also exchanged approximately $271 million of existing unsecured notes for second lien notes.
However, these measures proved insufficient to address the company's structural leverage issues and deteriorating liquidity position. By June 2025, the company was forced to post $38.3 million in cash collateral for surety bonds, further straining its financial resources.
The bankruptcy filing represents what company leadership views as the only viable path to right-size ModivCare's capital structure while preserving its ability to serve vulnerable patient populations who depend on its transportation and care services.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 225 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.