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Penn Treaty Again Extends Note Exchange Deadline

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NU Online News Service, Oct. 4, 11:54 a.m. – Penn Treaty American Corp., Allentown, Pa., is giving its noteholders more time to participate in its debt exchange.

The long-term care insurer has offered to exchange $74.75 million in subordinated convertible notes due in 2003 for the same amount of convertible notes due in 2008.

Penn Treaty is extending the deadline for participation a second time, to Oct. 10, from Oct. 3. Last week, the company extended the deadline to Oct. 3, from Sept. 26.

Holders had tendered $42 million in notes by the Sept. 26 deadline, and they tendered $6 million more by Oct. 3, bringing the total amount tendered to $48 million, Penn Treaty says.

Penn Treaty reported Sept. 27 that it believed its noteholders would be tendering $10 million in additional notes, which would have brought the total to $52 million.

Now Penn Treaty says it hopes to arrange exchanges for $13 million in additional notes, which would increase the total value of the note exchange to $61 million.

“The subordinated notes tendered and not withdrawn pursuant to the offer represent approximately 65% of the total outstanding subordinated notes,” Penn Treaty says. “Amounts held by institutions with which the company is holding continuing discussions represent an additional 17%.”

The exchange offer is a significant part of the company’s strategy for strengthening its balance sheet, the company says.

In related news, Penn Treaty says the volume of new applications it receives for long-term care insurance coverage has more than doubled since July, when it won regulatory approval to resume selling LTC coverage in Florida.

Penn Treaty has usually reported profits and strong growth in sales, but regulators’ concerns about the amount of capital it had to back its LTC policies forced it to suspend selling new policies about a year ago.

Now that the company has reinsured its old LTC policies and received permission to resume selling new policies in Florida and 30 other states, the average number of new LTC insurance applications received has increased to more than 170 per week, from about 75 per week, Penn Treaty says.