Rotech Healthcare Inc. : Form 8-K - December 21, 2012

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

Orlando, Florida 32804

(Address of principal executive offices Zip Code)

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 14e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

On December 21, 2012, Rotech Healthcare Inc. (the "Company") entered into a new term loan credit agreement with Silver Point Finance, LLC, as administrative agent thereunder and SPCP Group, LLC (an affiliate of Silver Point Finance, LLC), as initial lender thereunder (the "Credit Agreement") relating to a term loan credit facility (the "Facility") in an aggregate principal amount of $25 million. Pursuant to the Credit Agreement, the Company borrowed $23.5 million of the Facility on December 21, 2012. The remaining $1.5 million portion of the Facility that is not borrowed at such time (such portion, the "Delayed Draw Facility") may be borrowed on or before January 1, 2014 (the earliest of such borrowing, the Company's voluntary termination of undrawn commitments in respect of the Delayed Draw Facility and January 1, 2014, the "Delayed Draw Termination Date"), so long as certain limited conditions as set forth in the Credit Agreement are satisfied.
The Facility replaces and repays commitments and loans under our Credit Agreement, dated as of March 17, 2011 (as amended, the "2011 Credit Agreement") and, assuming the Company will borrow $1.5 million under the Delayed Draw Facility, increases available liquidity in the Company by approximately $15 million. In addition to repaying amounts outstanding under the 2011 Credit Agreement and fees and expenses associated with the Facility, the proceeds of the Facility should provide the Company with additional flexibility to address anticipated competitive changes and opportunities in the industry and working capital needs supporting the Company's business plans.
The loans under the Facility will mature on April 30, 2015. The Credit Agreement does not require any amortization payments in respect of the loans and the entire principal amount is due at maturity. All borrowings under the Facility participate in a first priority security interest in substantially all of the Company's and the subsidiary guarantor's assets with the Company's $230 million in aggregate principal amount of 10.75% senior secured notes due October 15, 2015.
Amounts under the Facility bear interest at (i) the LIBOR Rate (as defined in the Credit Agreement) plus 10.0% per annum or, at the Company's option, (ii) a fluctuating rate (defined as ABR in the Credit Agreement) plus 9.0% per annum. Interest is payable monthly. The default rate under the Facility is 3.0% per annum above the otherwise applicable interest rate. A "ticking" fee on the commitments in respect of the Delayed Draw Facility in an amount equal to 500 basis points per annum will begin accruing from March 31, 2013 to the Delayed Draw Termination Date and shall be due and payable in cash on a monthly basis.
To the extent the Company or any of its restricted subsidiaries obtain net cash proceeds from the incurrence of indebtedness not permitted to be incurred pursuant to the Credit Agreement, issuances of equity by the Company (other than pursuant to a registration statement on Form S-8), asset sales or insurance/condemnation events, mandatory prepayments of the loans will be required, subject to exceptions set forth in the Credit Agreement.
Such mandatory prepayments and any voluntary prepayments are subject to a premium of (i) 6.0% in the case of a prepayment made on or prior to December 31, 2013 (or 4.5%, if such prepayment is made in connection with a change in control) and (ii) 3.0% in the case of a prepayment made on or after January 1, 2014 through and including December 31, 2014. Prepayments made on or after January 1, 2015 are not subject to a premium. Any commitment reductions in respect of the Delayed Draw Facility after March 31, 2013 are subject to a premium of 6.0%.
As set forth in the Credit Agreement, the Facility contains negative covenants that further limit the Company's ability to incur indebtedness and grant liens on its assets. In addition, as described in the Credit Agreement, the Company is required to maintain compliance, to be tested on a quarterly basis (commencing with the fiscal year ending December 31, 2012), with financial covenants consisting of (i) a minimum trailing twelve month EBITDA; (ii) a minimum fixed charge coverage ratio and (iii) a maximum total leverage ratio.

As disclosed in Item 1.01 hereof, on December 21, 2012, the Company entered into the Facility, which replaces and repays commitments and loans under the Company's Credit Agreement, dated as of March 17, 2011 (as amended, the "2011
Credit Agreement"), with the lenders party thereto on the date thereof and Credit Suisse AG, as administrative agent thereunder (in such capacity, the "Administrative Agent"). Additional information regarding the 2011 Credit Agreement is contained in the Company's current reports on Form 8-K filed on November 5, 2012 and March 13, 2012 and is incorporated by reference herein.

(d) Exhibits.

99.1 Rotech Healthcare Inc. Press Release, dated December 21, 2012.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: December 21, 2012 ROTECH HEALTHCARE INC.
By: /s/ Steven P. Alsene Steven P. Alsene
Chief Operating Officer

Rotech Healthcare: Philip L. Carter

President & Chief Executive Officer
407-822-4600

portion of the new facility not yet borrowed may be borrowed on a delayed draw basis on or before January 1, 2014, so long as certain limited conditions as set forth in the credit agreement are satisfied. The facility replaces and repays the Company's existing commitments and loans under our prior credit agreement and, assuming the Company will borrow the $1.5 million portion of the facility not yet borrowed, increases our available liquidity by approximately $15 million.
The loans under the new facility will mature on April 30, 2015, at which point the entire principal amount is due. The new credit agreement does not require any amortization payments in respect of the loans. All principal borrowings under the facility participate in a first priority security interest in substantially all of the Company's and the subsidiary guarantors' assets with the Company's $230 million in aggregate principal amount of 10.75% senior secured notes due October 15, 2015.
"We expect that proceeds from the new credit facility will provide the Company with additional flexibility to respond to competitive changes and opportunities in the industry and will support the Company's working capital needs as we implement our business plans," said Philip Carter, President and Chief Executive Officer.

Rotech Healthcare Inc. is one of the largest providers of home medical equipment and related products and services in the United States, with a comprehensive offering of respiratory therapy and durable home medical equipment and related services. The Company provides home medical equipment and related products and services principally to older patients with breathing disorders, such as chronic obstructive pulmonary diseases (COPD), which include chronic bronchitis, emphysema, obstructive sleep apnea and other cardiopulmonary disorders. The Company provides equipment and services in 49 states through approximately 420 operating locations located primarily in non-urban markets.

This press release contains certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of section 21E of the Securities Exchange Act of 1934, as amended, and section 27A of the Securities Act of 1933, as amended. These forward-looking statements include all statements
regarding the intent, belief or current expectations regarding matters discussed in this press release and all statements which are not statements of historical fact. Words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "may," "will," "could," "should," "would," variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from those stated or implied in this press release. The following are some but not all of such risks, uncertainties, contingencies, assumptions and other factors, many of which are beyond the control of the Company, that could cause results, performance or achievements to differ
materially from those anticipated: general economic, financial and business conditions; our ability to successfully transition and retain patients associated with equipment and asset purchases; setting of new reimbursement rates and other changes in reimbursement policies, the timing of reimbursements and other legislative initiatives aimed at reducing health care costs associated with Medicare and Medicaid; issues relating to reimbursement by government and third-party payors for the Company's products and services generally; the impact of competitive bidding on Medicare volume in the impacted
competitive bidding areas; the costs associated with government regulation of the health care industry; health care reform and
the effect of changes in federal and state health care regulations generally; whether the Company will be subject to additional regulatory restrictions or penalties; issues relating to our ability to maintain effective internal control over financial reporting and disclosure controls and procedures; compliance with federal and state regulatory agencies, as well as accreditation standards and confidentiality requirements with respect to patient information; the effects of competition, industry consolidation and referral sources; recruiting, hiring and retaining qualified employees and directors; compliance with various settlement agreements and corporate compliance programs; the costs and effects of legal proceedings; the Company's ability to meet our working capital, capital expenditures and other liquidity needs; our ability to maintain compliance with the covenants contained in our indentures for our senior secured notes and our senior second lien notes; our ability to maintain current levels of collectability on our accounts receivable; our ability to successfully realize material improvements in bad debt expense levels and revenue adjustments; and other factors as described in the Company's filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company does not undertake any obligation to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

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