American Exchange Acts : Stock Trading Halted for Care Enterprises
Trading in the stock and bonds of troubled Care Enterprises has been halted by the American Stock Exchange, following the firm’s announcement Tuesday that a trustee demanded immediate payment of more than $50 million that the company owes a group of bondholders.
Care Enterprise issues have not traded since Tuesday, and the exchange said trading in the stock and bonds wouldn’t be allowed to resume until the firm provides additional information about its tersely worded statement, according to Pam Jones, a spokeswoman for the exchange.
Jones declined to provide further details of the decision, adding that halts in trading are not unusual.
Officials of Care Enterprises, a Tustin-based nursing home operator, could not be reached for comment Thursday.
George Friedman, a broker with Milwaukee Co., a brokerage firm that represents 5% of Care Enterprise’s bondholders, said he expects Care to provide the exchange with the information request.
“When an issue doesn’t trade, it raises a level of fear. I don’t see why Care would want that. And I don’t see any benefit to being uncooperative,” Friedman said.
He said the demand for immediate payment, which came from trustee Security Pacific National Bank, was not a surprise, and the details of Security Pacific’s demand appear to be relatively straightforward.
In its prepared statement Tuesday, Care said it will attempt to persuade its bondholders to revoke the trustee’s action as a requirement for accepting a plan for exchanging their existing bonds for new bonds.
Care Enterprises fell into default on the debt instruments when it failed to make a $2.3-million interest payment due Dec. 1. The firm has a second bond issue outstanding totaling $17 million.
For three months, Care Enterprises has been trying to persuade its bondholders to swap the bonds for securities that offer higher interest rates in exchange for a delay in interest payments and the removal of restrictions that prohibit the company from refinancing bank debt.
Security Pacific Bank’s action follows a similar move by R.D. Smith, a New York brokerage house claiming to represent 29% of the holders of the $51.7-million bond issue.
Friedman said he doubts that Care Enterprises can repay the money. Depending on Security Pacific’s intentions, he said, the bank could use the threat of a court action to recover the bondholders’ money in an effort to gain clout in negotiations with Care Enterprises or to push the company into a Chapter 11 bankruptcy reorganization.
Care Enterprises Class B voting stock closed unchanged Tuesday at 87.5 cents per share. The firm’s Class A stock closed at 50 cents per share, down 12.5 cents. Care Enterprise’s bonds traded at a deep discount of 36, down 4.
