On Monday, April 15, 2013 (the “Petition Date”), The Scooter Store Holdings, Inc. (the “Scooter Store” or “Debtor”), and various related entities filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. Based in New Braunfels, Texas, Scooter Store is one of the nation’s largest providers of power wheelchairs, scooters, lifts, ramps and other related equipment. See Declaration in Support of Chapter 11 Petitions and First Day Motions (the “Decl.”) at *3. Scooter Store began its operations in 1991. Since then, the company has served over 700,000 senior citizens and disabled persons through its equipment offerings and services. Id.
Company Operations and Debt Structure
At the height of its operations, Scooter Store employed over 2,400 employees in 48 locations throughout the United States. As of the Petition Date, however, the company had reduced its employees down to 300. Decl. at *4. In 2011, Sun Capital Partners purchased a majority voting interest in the company. Sun owns debts, preferred stock and warrants that represent over 66% of the voting ownership interest in the company. Decl. at *4-5. The company’s debt includes a first lien loan agreement for $25 million, a second lien facility for $25 million and a third lien facility totaling $40 million. Decl. at *6.
Events Leading to Bankruptcy
Prior to bankruptcy, Scooter Store defaulted on each of its three credit facilities. Decl. at *7. The company entered into forbearance agreements with its lenders in December of 2012 and again in March of 2013. Id. Debtor attributes in bankruptcy filing, in part, to changes in Medicare laws and regulations. In 2011, Medicare changed the timing of its payments for mobility devices to a “13 month capped rental model.” Decl. at *8. Under its business model, Scooter Store devoted significant amounts of cash to advertising, depriving it of the liquidity it needed to sustain the changes in timing and method of payment. Id.
Besides the changes in the timing of payment, Scooter Store has also suffered due to government investigations which have harmed both the company’s finances and goodwill. The Debtor is the subject of a criminal investigation by the Department of Justice focusing on the company’s former management. Decl. at *8-9. The company has also suffered from a civil investigation regarding its billing and reimbursement procedures. Decl. at *9.
Objectives in Bankruptcy
Scooter Store filed for bankruptcy intending to sell substantially all of its assets pursuant to section 363 of the Bankruptcy Code. Decl. at *10. Under the company’s “Reorganization Milestones,” Scooter Store hopes to establish a bid deadline of July 23, 2013, with an auction on July 25, 2013 and a closing on the sale on or before July 30, 2013. Decl. at *10.
The Scooter Store bankruptcy is before Judge Peter J. Walsh of the Delaware Bankruptcy Court. This bankruptcy is proceeding under Case No. 13-10904(PJW). Scooter Store is represented by the law firm Young Conaway Stargatt & Taylor.