A long-term care (LTC) company says it needs more financial flexibility to cope with Medicare reimbursement rate cuts that took effect Oct. 1.
Sun Healthcare Group Inc., Irvine, Calif. (Nasdaq:SUNH), says it will be trying to amend its senior secured credit facility.
If the company succeeds at reaching an agreement with the lenders that provided the facility, it would pay back principal more quickly and pay a higher rate of interest in exchange for more flexibility in connection with covenants, the company says.
Loan covenants might relate to matters such as a company’s profitability or revenue growth.
Sun needs more flexible coventants to deal with the fact that Medicare has started paying less for skilled nursing facility care, Sun says.
But, “even without an amendment, the company expects to remain in compliance with its covenants under its senior secured credit facility at least through 2012 from a combination of debt pay-down using a portion of its existing cash and projected operating cash flows,” Sun says.
Sun has about $1.9 billion in annual revenue and facilities in 46 states. It runs skilled nursing facilities, assisted living facilities, independent living facilities and mental health centers. It also provides medical staffing services and hospice services.