WHP Seeks New Equity
Financially troubled Western Health Plans has hired Shamrock Investments, a Los Angeles-based investment banking firm, to seek added equity capital or arrange the possible sale of the health maintenance organization that was formed in 1979, Western President Robert Erra said Tuesday.
“We feel that (a sale) is certainly an alternative,” Erra said. “We have to have a source of equity within the next 90 to 120 days. That’s the timetable we’re working on.”
Shamrock most recently helped arrange the sale of a health maintenance organization in Northern California, Erra said. Shamrock is owned by several former hospital-industry executives.
WHP, which operates the Greater San Diego Health Plan, on Tuesday reported a $13.9-million net loss for the year ended June 30. WHP reported a combined net loss of $6.3 million during the previous two fiscal years.
The losses left WHP with negative shareholders’ equity of about $8.7 million on June 30, Erra said.
WHP’s independent auditors are expected to qualify the company’s financial statements because of the negative shareholder equity, Erra said. Auditors qualify financial statements if problems could interfere with a company’s remaining viable.
WHP’s auditors also raised questions about “material weaknesses in internal controls relating to the recording of certain transactions,” according to Erra.
The California Department of Corporations in recent months has reviewed WHP’s books because of its long-running financial problems. “We’ve kept (the department) apprised of our situation and are in constant contact with them,” Erra said Tuesday.
WHP also has been reporting its shareholder equity problems to the American Stock Exchange, Erra said.
WHP, which trades on the American Stock Exchange, was unchanged Tuesday at $.9375 with no shares changing hands. WHP traded at a high of $5.50 during the past two years. About 75% of the publicly traded company’s stock is held by the 1,100 doctors who provide medical care for WHP’s 110,000 members.
Erra declined to quantify fourth-quarter losses or discuss cost-cutting measures WHP has initiated during the last year. He said a company report to the federal Securities and Exchange Commission that is due out within a week “will answer some questions.”
Continuing operations generated $7.4 million of the net loss for the most recent fiscal year. A fourth-quarter decision to discontinue a wholly owned financial and management assistance subsidiary generated the rest, Erra said.
