Nu-Med Agrees to Sell Nearly Half Its Business

Encino-based Nu-Med Inc., seeking to pare its heavy debts, said Tuesday that it agreed to sell four hospitals and two hospital operating leases for about $125 million. The properties represent nearly half of Nu-Med’s business.

Primus Healthcare Partners will acquire Nu-Med Regional Medical Center in Canoga Park, Coast Plaza Medical Center in Norwalk, and a hospital in Texas, Nu-Med said. Primus, based in New York, also will acquire operating leases for the Medical Center of La Mirada and another hospital in Oregon. Nu-Med also agreed tentatively to sell its Pembroke Pines General Hospital in Florida to Humana, a hospital operator based in Louisville, Ky.

The four hospitals and two leases generated revenue of $134 million in the past fiscal year. Total revenue was $270.6 million.

After the sales, Nu-Med would still own and operate Sherman Oaks Community Hospital and Terrace Plaza Medical Center in Baldwin Park as well as six psychiatric facilities. The company also would own a stake of undetermined size in Primus, said Nu-Med Vice Chairman Kenneth E. Rappoport.

Earlier this year, Nu-Med sold three medical service subsidiaries to a new company formed by a Beverly Hills investment group for an estimated $45 million.

The proposed additional sales would enable Nu-Med to cut its debt by at least $100 million, Rappoport said. Its long-term debt totaled about $280 million last July 31, nearly 19 times net worth.

Nu-Med expanded rapidly in the mid-1980s, borrowing to fund acquisitions. Saddled with that debt, Nu-Med lost $10.1 million in the fiscal year ended April 30, and $13.9 million the previous year. It reported net income of $1 million on sales of $73.9 million in the quarter ended July 31.

In July, Nu-Med scrapped plans to sell the same set of hospitals and leases for $122 million in cash and $88 million in notes and preferred stock to a new company that was to have been owned mostly by an employee stock ownership plan, or ESOP. That plan faltered after Nu-Med was unable to sell debt securities in the new company because of uncertainties about the future tax-treatment of ESOPs.

Primus also plans to set up an ESOP, but Rappoport said those tax uncertainties have been resolved.