Lee and Dee Bangerter and their estranged...
Lee and Dee Bangerter and their estranged half-brother, Ted Nelson, probably have a long Christmas wish list for Care Enterprises, a company they founded. Their stock in the Laguna Hills-based nursing-home operator has lost most of its value in the past two months.
Care Enterprises was a consistent profit maker until last year, when it began reporting staggering losses. While losses continue, the company is hurrying to restructure a huge debt and worrying about bankruptcy as loan due dates approach.
As a result of the problems, Care Enterprise’s Class B stock has fallen nearly 78% since early October, from $4 per share Oct. 2 to Friday’s closing price of 87.5 cents, down 37.5 cents for the week. From its 12-month high of $5.125, the stock is off 83%.
The brothers’ total investment of 3.75 million shares has declined from $19.2 million in value to $3.28 million.
The outlook for the stock and for the debt-laden company is uncertain, according to industry analysts.
Care Enterprises has asked the owners of $68 million of its notes and bonds to swap them for securities that offer slightly higher interest rates in exchange for removing restrictions that currently prohibit the company from refinancing $35 million in bank loans.
The 500 owners of debentures and 15 owners of notes have until Dec. 15 to make up their minds, but a health care industry analyst predicts that the debt holders will turn down the company’s request and insist on better terms.
A delay in removing the note and bond restrictions will also delay Care’s refinancing negotiations with its bank lenders. Care Enterprises said that it cannot make a $5-million loan payment due Dec. 31 and that there is a risk of the company entering bankruptcy because of failure to meet the payment with the banks.
Adding to the financial stickiness, Care Enterprises’ nursing home business has gone bad.
After years of profit increases, the company lost $10 million in 1986, and for the third quarter of 1987, Care Enterprises lost an additional $14.4 million.
“It’s not an industry to get into,” said Lindsay Rosenwald, a health services analyst at the brokerage firm of D. H. Blair & Co. in New York. Rosenwald said government reimbursements for nursing-home stays have been down in recent years, while the cost of maintaining homes has increased.
“The business requires a lot of money, but assets are not appreciating,” Rosenwald said.
Because of poor performance, nursing-home operators have lost the interest of many health care industry analysts, and analysts have defected from Care Enterprises because of the company’s uncertain financing.
One analyst said he no longer follows Care Enterprises because “I don’t understand the decisions they make.”
For instance, he noted that Southmark Corp., a Dallas real estate conglomerate, recently withdrew a bid to acquire control of Care Enterprises. Southmark said it withdrew after Chairman Lee Bangerter and other members of the company’s board of directors refused to discuss the proposal, which Care Enterprises considered to constitute an “unfriendly takeover bid.”
Southmark proposed last spring to secure voting rights to about 23% of the voting shares from Ted Nelson, a dissident co-founder and former director, and to buy an additional 26% of voting shares held by the company’s vice chairman, Dee Bangerter, who is in personal bankruptcy.
One analyst, who asked not to be identified, noted that Lee Bangerter, whose salary was $338,000 in 1986, might not have wanted to lose his involvement with the company. “But it would have been a wise move to sell,” the analyst said.
Because of the problems, analysts said Care Enterprises stock isn’t expected to gain value anytime soon. But they said they see little reason for the stock price to fall much lower.
