CEO, COO leaving is ‘exciting’ for MModal?
Did you catch the news this week about the shakeup in the executive suite of transcription and clinical documentation service provider MModal?
The Franklin, Tenn.-based company, formerly known as MedQuist, announced Tuesday that CEO Vern Davenport has “chosen to leave the company,” as has COO Amy Amick. In their place, MModal named Duncan W. James, formerly of QuadraMed, as the new CEO and promoted CFO Ron Scarboro to COO. Finance VP David Woodworth takes over as acting CFO. In addition, MModal brought in Graham O. King, ex-head of both Shared Medical Systems — now part of Siemens — and HBO & Co. — cleaning up a scandal at the latter company prior to its 1999 takeover by McKesson — to fill the newly established position of chairman of the board.
In a statement, Greg Belinfanti of MModal owner One Equity Partners said, “This is a very exciting, positive period for MModal as it continues to grow and increase its presence in the healthcare industry’s important clinical documentation segment.” Say what? You just lost two of your top three executives for reasons you aren’t disclosing and it’s an “exciting, positive period” for the company?
The only thing I can guess is that Davenport and Amick might be working on a new venture together. The two were both executives at Misys Healthcare Systems — Davenport as CEO — in 2008 when that vendor merged with Allscripts. For what it’s worth, at least two other top Misys people, namely Paul Edge and Michael Raymer, remain at MModal, as far as I can tell from their LinkedIn profiles and from MModal’s current list of executives. Stay tuned.
One Equity Partners is calling the shots now that they are private. They are bringing in their own people since the company has been losing money
http://histalk2.com/2013/06/04/news-6513/
Debtwire said that on April 3, executives told their debt holders that they fell out of compliance in the period ending March 31 and One Equity will ‘cure’ this. Is this routine?” I asked Ben Rooks, who writes HIStalk’s “Healthcare IT from the Investor’s Chair,” who with help from his friends at investment bank Houlihan Lokey provides this explanation:
Loans such as the one that allowed One Equity to borrow money to purchase MModal (the Leverage in the term LBO, or Leveraged Buy Out) have certain ongoing requirements with which the company must comply (known as “covenants”). In this case, there was actually only one such covenant, but it allowed for a maximum amount of net leverage (how much debt each dollar of EBITDA — earnings before interest, taxes, depreciation, and amortization — must support). This metric rose since the deal closed, reaching 6.43x at the end of last year in contrast to the 5.35 that was projected. Interestingly, it was set at 6.5 in Q1, then drops sequentially by .25 until it reaches 5.75 in Q1 2014 (presumably as the company both pays down its debt and grows its revenues and EBITDA). According to Standard & Poor (the debt rater in this case), “MModal has seen its revenue weaken as a result of a slower-than-expected transition to its new products strategy and competitive pricing pressures” and it downgraded the debt a notch. Realizing that these things can happen, however, the loan agreement allows the sponsor (One Equity) to cure the problem, typically by adding more equity dollars or else guarantying part of the loan. Incidentally, M*Modal might not be public, but its debt is, so this was, in fact, disclosed publicly, just not as loudly as in the case of public companies.
Thanks for the insight.
Hundreds laid off I am told from M*Modal last week, hurrah more filing for UA and TAA. Good going company, employees love new management.
This company has off-shored their work to India. They only maintain the required number of US employess to maintain their US status and tax breaks.