The Scooter Store Files For Bankruptcy In Delaware, Citing Government Regulations And Investigations

Introduction

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...