MSP Recovery Soars 202.34% on Restructuring Deal

On April 11, 2025, MSP Recovery's stock surged by 202.34% in pre-market trading, marking a significant turnaround for the company.

MSP Recovery has announced a strategic term sheet that includes a comprehensive restructuring plan with Hazel Partners Holdings and Virage Capital Management. The deal aims to reduce over $1.2 billion in corporate guaranteed debt, provide $9.75 million in bridge funding, and up to $25 million in working capital for a new servicer entity. The restructuring is expected to close by April 30, 2025, subject to definitive agreements and regulatory approvals.

The restructuring involves the formation of a new servicer subsidiary with independent management, where Virage will receive a 43% equity stake in exchange for waiving claims. Additionally, approximately $144 million in principals' debt will be converted to equity, and debt obligations will be extended to November 2026. This restructuring is designed to address severe balance sheet distress and provide critical breathing room for the company.

The transaction architecture reveals several key elements, including Virage Capital acquiring a 43% equity stake in exchange for releasing claims worth approximately $1.2 billion, and the conversion of $144 million in debt to equity, creating substantial dilution for existing shareholders. The formation of a largely independent servicing entity shifts operational control outside the parent company, indicating the company faced severe financial distress requiring radical intervention.

The restructuring fundamentally alters MSP Recovery's governance structure and operational framework. The creation of a "New Servicer" subsidiary with an independent board and management team effectively transfers control of core business operations away from the parent company, representing a significant concession to creditors. The governance changes are particularly notable, with the New Servicer having an independent board with only one member from MSP Recovery, and creditor Hazel approving the independent directors. This unusual arrangement essentially gives creditors operational oversight while the parent company retains intellectual property ownership but operational control.

The debt-to-equity conversions dramatically reshape the ownership structure, with Virage gaining a 43% equity position and executives John Ruiz and Frank Quesada converting approximately $144 million in debt to equity. This transaction structure preserves the company as a going concern but at the cost of existing shareholder dilution and diminished corporate autonomy. The multiple funding tranches tied to performance milestones create a governance mechanism where capital flow depends on operational execution, effectively putting creditors in control of the company's financial lifeline. This arrangement, combined with the extension of debt maturities to 2026, suggests creditors saw more value in restructuring than forced liquidation, but imposed strict terms that significantly constrain management's autonomy.