MModal Misses Bond Payment During Creditor Talks to Reduce Debt

By Matt Robinson for Bloomberg.com

MModal Inc. skipped a scheduled bond interest payment yesterday, taking advantage of a 30-day grace period as the provider of medical transcription services negotiates with creditors to cut the company’s debt load.

“At this time no determination has been made by MModal to not pay such scheduled interest payment” within the grace period, Joe McNamara, a spokesman for the company, which is owned by the private-equity arm of JPMorgan Chase & Co., said in an e-mailed statement today. The company believes that discussions with lenders and bondholders “have been constructive,” according to the statement.

Standard & Poor’s lowered the Franklin, Tennessee-based company’s credit rating today to D, indicating obligations in default or in breach of an imputed promise, from B-. MModal has loans of about $520 million and $250 million of unsecured notes, according to data compiled by Bloomberg.

MModal’s 10.75 percent bonds due August 2020 dropped 10.35 cents yesterday to 26 cents on the dollar to yield 50 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

S&P may raise MModal’s credit ranking if the company makes the interest payment before the end of the grace period. The ratings company expects MModal to restructure its obligations “given its highly leveraged capital structure.”

Company defaults have been falling as the U.S. central bank holds interest rates near zero to spur economic growth. As of Feb. 13, there were two corporate defaults globally, compared with 12 in the corresponding year-earlier period, according to a report from Diane Vazza, S&P’s head of global fixed-income research.