NU Online News Service, Aug. 1, 2003, 4:24 p.m. EDT – Magellan Health Services Inc., Columbia, Md., says Deutsche Bank A.G., Frankfurt, has agreed, under certain conditions, to provide $230 million in credit to help the company escape from Chapter 11 reorganization proceedings.
Magellan runs mental health and substance abuse treatment programs for one-quarter of all U.S. residents.
The company filed for protection from creditors in March in an effort to restructure debt left over from years when it ran up large losses.
A Canadian investment company, Onex Corp., Toronto, has agreed to invest $285 million in Magellan.
But the new credit facility “will provide reorganized Magellan with more favorable terms and greater financial flexibility than it would have had under the previously contemplated credit facility,” Magellan says.
Magellan would have five years to pay off the Deutsche Bank credit facility, but it would have only five years to pay off the other credit facility, Magellan says.
Magellan says the Deutsche Bank credit facility also would charge a lower interest rate.
Deutsche Bank is requiring that Magellan get bankruptcy court approval for a reorganization plan before it will set up the credit facility.
The consummation of the new facility also depends on “certain other conditions customary for commitments of this nature,” Magellan says.