Comp Care Will Sell Hospitals in State, Pay Off Debt
In the wake of the collapse of a critical merger, Comprehensive Care Corp. said Wednesday that it will sell its California facilities in an effort to stave off creditors concerned about the company’s deteriorating financial condition.
The nation’s largest alcohol and drug treatment company also said that it will move its headquarters to St. Louis, adding that W. James Nicol has been appointed as president and chief executive officer, replacing longtime executive B. Lee Karns. Nicol and Karns--who will remain as chairman of the board--regularly argued over Comp Care’s direction.
The moves follow Comp Care’s report last week of a $4.7-million third-quarter loss. Two days later on Oct. 27, First Hospital Corp. backed out of a merger with Comp Care after one of the financiers refused to consent to the deal.
Comp Care was counting on First Hospital, based in Norfolk, Va., to pay about $25 million in loans due Oct. 18 to three of its creditors. Comp Care, which previously said the merger was the key to its continued operation, hopes to pay the debt by selling some assets.
“Our overall position is that the California facilities plus the California headquarters building ought to be more than sufficient to discharge our secured debt and generate a little bit of working capital,” Nicol said.
The nine psychiatric and chemical dependence facilities that Comp Care owns in California are valued on the company’s books at about $45 million. They include CareUnit Hospital in Orange, Starting Point in Costa Mesa, Crossroads Hospital in Van Nuys and Woodview-Calabasas Hospital in Calabasas.
Nicol, 46, said the restructuring will result in the termination of about 50 administrative employees. The remaining 2,000 Comp Care employees in California will more than likely receive offers of employment from the company that purchases those facilities, he added.
Comp Care, formed in 1969, made a name for itself in psychiatric care, particularly in the treatment of alcohol and drug problems of celebrities and common folk. But in recent years, the company has struggled because of greater competition and changes in insurance-reimbursement programs.
Analysts viewed Comp Care’s announcement positively. The company’s stock, which lost more than half of its value last week, closed Wednesday up 12 1/2 cents to $3.75 in trading on the New York Stock Exchange.
“This is positive because they are not in Chapter 11 (bankruptcy),” said Margo Vignola, analyst with New York investment banker Salomon Bros. “And this is positive because clearly the banks have decided not to pressure them and allowed them to do a divestiture of assets so they could avoid going under.”
Comp Care, however, said Wednesday that the banks--Union Bank, Southeast Bank of Florida and Boatman’s Bank of St. Louis--had not yet approved the company’s restructuring plans. Spokesmen for the three lenders refused comment.
Several analysts said Wednesday that the company’s plan to sell off assets reduces the chances that it will have to seek bankruptcy protection.
“If you can convince people that they can get these assets sold, then the banks will sit back and wait,” Vignola suggested.
Nicol said Comp Care decided to sell its California facilities because they were valuable and would be easier to sell as part of a package deal. “In essence, we would no longer have a California operating presence,” he said.
St. Louis is the site of Comp Care’s RehabCare and CareUnits, which offer physical rehabilitation for victims of such maladies as strokes, as well as treatment for chemical dependency.
Nicol was president of the RehabCare and CareUnit divisions until he resigned in July after a disagreement with First Hospital.
“This last situation with First Hospital has left the company grievously wounded,” Nicol said. “Our operations suffered very badly.”
First Hospital became very involved this summer in the management of Comp Care, even though the two companies had yet to merge.
“Over the period of the proposed transaction, they did become more influential in the day-to-day operations of the company,” Nicol said. “They were making in some of our hospitals actual hire-and-fire decisions in most of the management positions.”
Comp Care has broken off all negotiations with First Hospital and is not seeking another buyer.
“As far as soliciting further suitors, the answer is no,” Nicol said. “We don’t have the time or inclination to continue that process. . . . This company very much needs to get back to commitments to people and day-to-day operation of the business.”
COMPREHENSIVE CARE CORP. RESTRUCTURES W. JAMES NICOL* Current position: President and chief executive officer.
* Age: 46.
* Residence: St. Louis, Mo.
* Background: Employed by Comp Care since 1973, Nicol served as vice president and treasurer from 1974 through 1983, and senior or executive vice president until 1985, when he became vice chairman and a member of the board of directors. Nicol resigned in 1987 to become president and CEO of RehabCare and CareUnits, but he returned to Comp Care in 1988 as executive vice president for contract operations and CEO of CareUnit. He resigned again about a year later.
CARE ENTERPRISES’ CALIFORNIA FACILITIES
Facility Location Owned or Leased Chemical Dependency Treatment Facilities CareUnit Hospital Orange Owned Starting Point, Oak Avenue Orangevale Owned Starting Point, Orange County Costa Mesa Owned Starting Point, Grand Avenue Sacramento Owned CareUnit Facility San Diego Owned Psychiatric Treatment Facilities Brea Hospital Neuropsychiatric Center Brea Owned Crossroads Hospital Van Nuys Leased to 1997 Woodview-Calabasas Hospital Calabasas Leased to 1996 Sutter Center for Psychiatry Sacramento Owned
Source: Comprehensive Care Corp.
