MSP Recovery announces major restructuring and funding deals

MSP Recovery, Inc. (NASDAQ:MSPR), a leader in healthcare claims recovery with a current market capitalization of $9.27 million, has entered into a significant restructuring agreement aimed at reducing debt and securing new funding, according to an 8-K filing with the SEC. According to InvestingPro analysis, the company is currently undervalued, though it operates with a significant debt burden and faces rapid cash burn challenges. The agreement, dated April 4, 2025, involves the creation of a new subsidiary to handle recovery efforts and a series of financial transactions to provide the company with much-needed capital.

The new subsidiary, referred to as New Servicer, will be tasked with managing recovery efforts through litigation, settlements, or other means, for existing and future claims. MSP Recovery will license its intellectual property to New Servicer in return for a minimum fee of $1.55 million due on May 30 and June 30, 2025. New Servicer will be independently managed and governed by a board of directors, including an independent CEO and one director each appointed by MSP Recovery and the funding affiliate of Hazel.

Hazel's affiliate has committed to providing New Servicer with up to $25 million in working capital, starting September 2025, with a maturity date of June 30, 2027. The funding will bear interest at the SOFR plus 5% for the first year and SOFR plus 10% thereafter. The agreement also grants Hazel's affiliate up to 35% of New Servicer's excess cash flow. This funding comes at a critical time, as InvestingPro data shows the company's current ratio stands at just 0.01, indicating significant liquidity challenges. Despite these challenges, analysts project substantial revenue growth of over 2,800% for the current fiscal year.

Additionally, Hazel agreed to extend up to $9.75 million in bridge financing to MSP Recovery to support the company through its restructuring process. This includes funds for operational expenses and a commitment from MSP Recovery's principals to pledge $25 million in collateral for future company funding needs.

In a debt restructuring move, Virage has agreed to waive all claims and release all liens against MSP Recovery relating to approximately $1.2 billion in exchange for a 43% equity interest in the company. MSP Recovery's principals have also consented to convert $144 million of the company's debt into Class A Common Stock.

The restructuring plan is subject to various conditions, including regulatory approvals, third-party consents, and potentially shareholder approval. Definitive agreements are expected to be signed by April 30, 2025. With the stock showing a beta of -2.29, investors should note its tendency to move contrary to broader market trends. For deeper insights into MSPR's financial health and additional trading signals, InvestingPro subscribers have access to over 15 additional ProTips and comprehensive financial metrics.

In a separate but related development, MSP Recovery has also amended its agreement with YA II PN, Ltd. ("Yorkville"), extending the maturity date of its convertible notes and the first Monthly Payment to November 30, 2026. Yorkville has also waived certain limitations, potentially enabling MSP Recovery to raise capital by selling shares to Yorkville over time.

The information is based on a press release statement.

In other recent news, MSP Recovery, Inc. has entered into a definitive agreement to restructure its financial obligations with Virage Recovery Master LP. This agreement involves Virage acquiring a 33 1/3% stake in MSP Recovery's Class A Common Stock, altering the company's ownership structure. Virage will also terminate its previous commitment to limit its ownership to 9.99% of MSP Recovery's outstanding Common Stock, granting proxy voting rights to MRCS Principals to retain voting control over 51% of the total outstanding Class A Common Stock. Additionally, MSP Recovery will no longer be obligated to issue monthly warrants or cash payments to Virage as previously required. In another development, MSP Recovery has reached an agreement concerning its financial obligations under a set of promissory notes with YA II PN, Ltd., known as Yorkville. The agreement includes a delayed payment schedule and a plan to issue shares, starting February 3, 2025, with at least 100,000 shares per week to be issued for eight consecutive weeks. This is part of the company's strategy to manage its financial commitments under the amended Standby Equity Purchase Agreement with Yorkville. These recent developments highlight MSP Recovery's ongoing efforts to streamline its financial commitments and adhere to its agreements.

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