Care Enterprises Gets 8-Month Extension on $14.2-Million Debt
Care Enterprises Inc., the faltering Laguna Hills nursing home operator, said Thursday that it has won a crucial eight-month extension on $14.2 million in bank debts and is negotiating with potential new lenders for additional long-term financing.
The extension was announced two days after Care’s June 30 deadline to repay $14.2 million of the $34.8 million borrowed from its two major lenders, Citibank of New York and Wells Fargo Bank, on a revolving line of credit.
“It’s a happy day over here for us,” said Richard Lazarnick, Care’s marketing vice president. “We had been going eyeball to eyeball with our lenders for either a new financing agreement or an extension, and we got what we needed.”
Care’s debts were incurred financing a major expansion drive. The debt load, which totals $175 million, has been a factor in the recent plunge in Care’s profits because a sizable portion of the company’s operating income must go toward paying interest on the loans.
Care has been trying to renegotiate its short-term loans and secure new long-term financing for most of the last six months.
Under terms of the loan extension, Care must repay $5 million of the $14.2 million by Dec. 31, with the remainder due on Feb. 29, 1988. In addition, the lenders agreed to extend Care a letter of credit for an additional $1.5 million loan and said they would allow the company to continue to borrow up to a maximum of $34.8 million on the existing revolving line of credit.
In a prepared statement, Lee R. Bangerter, Care’s president and chief executive, said the agreement was the direct result of the company’s “return to profitability and continuing operational improvements in the first quarter of 1987.”
Significant Improvement
In the first three months of 1987, the company earned $66,000 on revenues of $64.4 million. Although the performance was substantially below that of the prior-year period, it marked a significant improvement over the final quarter of 1986, when Care lost $9.2 million.
Bangerter said the loan extension would help Care in its attempts to convert its nearly $35 million in short-term borrowing to long-term notes. The company currently has long term debts of about $160 million.
The company said earlier that it has secured a commitment from one lender for up to $30 million in long-term financing. However, Care said Thursday, the agreement hinges on the company’s ability to find an additional lender.
