Westworld Again Extends Its Deadline for Debt Swap
For the third time since its exchange offer began in February, financially stricken Westworld Community Healthcare Inc. said Wednesday that it will extend the deadline for holders to swap $65 million of debt for new, low-interest debentures.
Westworld said it is now in default on $30 million in notes and has been in default on $35 million in debentures since the beginning of the year.
The Lake Forest-based company also said three of its five directors resigned because they could not arrange for necessary liability insurance.
Holders now have until next Wednesday to swap the 14.375% subordinated debentures and 14.5% subordinated notes for the new debentures, whose interest payments may be made in common stock.
Since the exchange offer became effective on Feb. 14, about $20 million in debt has been tendered, Westworld said. The company previously had set Wednesday as the deadline for the swap after extending it twice before.
Since the beginning of December, the company has been in default on a $2.5-million interest payment due on its $35 million in debentures. A $2.2-million interest payment on the $30 million in notes was due April 1.
Glenn Caster, a Westworld vice president, called the latest extension a “normal procedure.”
According to Caster, Westworld so far has won approval of the debt-swap scheme only from about a third of its debt holders because of delays in asking for their consent. “We didn’t even talk to a couple of the major (debt holders) until late last week,” Caster said. He added that much of the debt is held by nominees who had to be contacted.
Westworld expects to win the necessary approval of 98% of its debt holders, Caster said, although he acknowledged that the new deadline is not firm and could be extended.
The company has earlier said that if it fails to complete the exchange offer, it will probably be forced to file for a Chapter 11 reorganization under the U.S. Bankruptcy Code.
Westworld said the resignation of its three outside directors occurred because of what it called “significantly reduced directors’ and officers’ insurance coverage.” The company is seeking additional coverage and will address the issue with shareholders at its annual meeting, which has been rescheduled for June 1.
The directors who resigned are Donald Lucas, a venture capitalist from Northern California; David Holbrooke, a San Francisco physician, and Richard Stensrud of St. Louis University Hospital.
The two remaining directors are Stephen Arterburn, chairman, president and chief executive officer; and Walter J. Kaczor Jr., executive vice president and chief financial officer.
