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Highlights

  • MSP Recovery signs major restructuring term sheet with Hazel Partners and Virage Capital.

  • Restructuring to eliminate $1.2 billion in corporate guarantees and convert $144 million in debt into equity.

  • $25 million in funding allocated for a new servicing entity focused on core Medicare claims recovery.

MSP Recovery, Inc. (NASDAQ:MSPR), a leading technology-driven platform for recovering Medicare, Medicaid, commercial, and secondary payer claims, has announced a comprehensive restructuring initiative aimed at significantly boosting its financial position and sharpening its operational focus.

The company has entered into a strategic term sheet with Hazel Partners Holdings, LLC, Virage Capital Management, and their affiliates. The agreement outlines a multifaceted restructuring plan that includes the elimination of over $1.2 billion in debt guarantees, the conversion of approximately $144 million in debt into equity, and access to new operational and bridge funding. The initiatives are designed to streamline the business and enhance the Company’s ability to execute on its core mission: recovering improperly paid healthcare claims under the Medicare Secondary Payer (MSP) laws.

The restructuring framework calls for the formation of a new, independently operated subsidiary, referred to as the “New Servicer,” which will handle all servicing operations related to claim recoveries. Hazel will provide up to $25 million in funding for the New Servicer, released in tranches starting in September 2025. The New Servicer will be led by an independent CEO and board, with technology powered by MSP Recovery’s proprietary data systems.

In parallel, Hazel has also committed to providing up to $9.75 million in bridge funding to the company itself, $6.5 million of which remains available through July 2025. After that, company principals have pledged an additional $25 million in collateral to support working capital needs.

MSP Recovery anticipates reducing its annual operating costs by $5.6 million through this new structure. The restructuring is expected to provide long-term sustainability while reinforcing the company’s capabilities in the legal, data, and healthcare spaces.

As part of the agreement, Virage Capital will convert its claims related to the VRM Full Return — valued at $1.2 billion as of March 2025 — into a 43% equity stake in MSP Recovery. Virage also relinquishes liens and claims against the company, with certain lien rights retained only through limited, subordinated claims recoverable from future servicing proceeds.

Additionally, the company’s principal stakeholders, John H. Ruiz and Frank C. Quesada, will convert their $144 million debt holdings into Class A common stock, pending tax analysis and board approval.

Hazel’s $100 million in existing loans to Subrogation Holdings will be extended to November 30, 2026, excluding any lien on the company’s intellectual property. Hazel will secure its investment by obtaining a controlling interest (50.1%) in the New Servicer and 50% of the future proceeds from its operations until the funding is repaid.

Yorkville, another key financial partner, has agreed to extend its payment deadline to the same date, while also waiving certain limitations on the company’s ability to raise capital through stock sales.

Pending regulatory and shareholder approvals, MSP Recovery expects to finalize the restructuring by April 30, 2025.