NU Online News Service, Aug. 22, 2:26 p.m. – PacifiCare Health Systems Inc., Santa Ana, Calif., says its lenders have agreed to give it an extra year to pay off its revolving debt.
The lenders have postponed the maturity date on an $800 million “senior credit facility” one year, to Jan. 2, 2003.
PacifiCare, a manged care company, set up the variable-rate credit facility in October 1996, to finance the acquisition of another managed care company.
The credit facility started out with a credit limit of $1.5 billion, but the original credit agreement called for the limit to drop to $800 million July 1, and to zero Jan. 1, 2002.
PacifiCare had a balance of $735 million March 31, according to a quarterly report the company filed with the U.S. Securities and Exchange Commission. The average interest rate on the balance was about 7.9%.
PacifiCare tried to refinance the credit facility in June by selling $500 million in notes, but it ended up canceling that effort because of difficulties with finding buyers.
The securities unit at Bank of America Corp., Charlotte, N.C., the bank that helped PacifiCare set up the original credit facility, worked with securities units at Citigroup Inc., New York; and J.P. Morgan Chase & Company, New York, to extend the life of the original facility.
Under the new agreement, the facility will provide a combination of a $650 million term loan and a $150 million revolving line of credit.
The lenders have set a new, variable interest rate that will be 3.5 percentage points greater than the London Interbank Offered Rate.
LIBOR is a set of rates that a group of large London banks use when setting rates on loans to other banks. The London banks charge different rates for loans with different maturities.
PacifiCare did not say which LIBOR its lenders will use to calculate its interest payments. The current LIBOR for overnight loans made to U.S. banks is now 3.61625%, according to the Financial Times.
PacifiCare will pay the lenders $8 million for the changes to the credit facility agreement.
More information about the credit facility is available on the SEC Web site, at http://www.sec.gov/Archives/edgar/data/766456/0000912057-96-026780.txt