NU Online News Service, July 27, 12:25 p.m. – PacifiCare Health Systems Inc., Santa Ana, Calif., says it is canceling previously announced plans to refinance $100 million in senior notes due in 2003 because of difficulties with replacing a revolving bank credit facility and selling new notes “in light of market conditions.”
But the managed care company emphasizes that it had an average of $130 million in free, unencumbered cash during the second quarter; expects to report earnings of 45 cents per share for the quarter; and remains in compliance with all existing bank covenants.
PacifiCare set up a five-year, unsecured, variable-rate credit facility in October 1996 to finance the acquisition of FHP International Corp., a Fountain Valley, Calif., managed care company. Bank of America Corp., Charlotte, N.C., organized the syndicate.
The credit facility started out with a credit limit of $1.5 billion. The limit dropped to $800 million July 1 and is scheduled to drop to zero Jan. 1, 2002.
PacifiCare had a credit facility balance of $735 million March 31 and an overall interest rate of about 7.9%, according to a quarterly report the company filed with the U.S. Securities and Exchange Commission.
PacifiCare announced in June that it had received commitments from a group of lenders to arrange a new, $500 million credit facility. It also announced plans to offer $500 million in notes due 2011, and to use some of the proceeds from the note offering to buy back $100 million in 2003 notes that were originally issued by FHP.
But the company extended the deadline for the note buyback twice, and now it says it has “discontinued efforts to obtain senior note financing in light of market conditions.”
PacifiCare is “working on debt refinancing solutions to repay or extend its existing credit facility that expires in January 2002,” the company says.
The company will explore the possibility of extending the existing credit facility and other alternatives, the company says.
More information about the credit facility is available on the Web site of the U.S. Securities and Exchange Commission, at http://www.sec.gov/Archives/edgar/data/766456/0000912057-96-026780.txt