HPB Seeks Role in Restructuring of Nu-Med Inc.
HPB Associates LP, a New York investor group that owns 9.9% of struggling Nu-Med Inc., said it is seeking seats on Nu-Med’s board of directors to have a greater say in the restructuring of the Encino-based health-care management concern.
HPB, led by investor Howard P. Berkowitz, also said in a filing last week with the Securities and Exchange Commission that its plan is supported by another major shareholder, Allen Holding Inc., an affiliate of the wealthy New York investment firm Allen & Co., which owns an additional 9.5% of Nu-Med.
HPB said it wants an unspecified number of its designees added to Nu-Med’s 13-member board. They would participate in any restructuring steps, “which would increase the value of the company and the stockholders’ interest,” it said.
The disclosure sparked a moderate rally in the shares of Nu-Med, which operates six acute-care hospitals and six psychiatric-care facilities in seven states. The stock, which stood at $2.69 a share Sept. 7, closed Monday at $3.50 a share in over-the-counter trading.
Nonetheless, Berkowitz’s investment has a paper loss of about $3 million, which is presumably why he wants to help reorganize Nu-Med.
Kenneth E. Rappoport, Nu-Med’s vice chairman, said Berkowitz visited with Nu-Med management two weeks ago, but Rappoport cautioned that talks concerning HPB’s proposal “have just really begun.”
However, Rappoport said there “was no indication from him of threatening to take control” of Nu-Med. “As a significant shareholder, he would like to have representation on the board, and he certainly is entitled to some representation,” he said.
Nu-Med, struggling with excessive costs, too many empty beds and burdensome debts in recent years, has been trying to stem its losses. After losing $7.3 million on revenue of $278 million in its fiscal year that ended April 30, Nu-Med announced Monday that it had a $958,000 profit on revenue of $66.3 million in its fiscal first quarter that ended July 31. A year earlier, it earned $1.04 million on revenue of $73.9 million.
In March, Nu-Med sold one of its acute-care hospitals in Florida to Humana Inc. for $68 million, which it used to help repay its debt. But another proposal to sell three additional hospitals and other assets to a separate group fell through.
It was last October when Berkowitz bought 298,000 Nu-Med shares--to reach his 9.9% holding--for between $6.28 and $7.18 a share, according to his SEC filing at the time. The filing also showed that he had invested $5.8 million in the company. His stake has a current market value of $3.1 million.
Berkowitz’s office said he was on vacation last week and not available to elaborate on his group’s filing. James Quinn, chief financial officer of Allen & Co., said Allen does not comment on its investments.
