Nu-Med Agrees to Sell 2 Hospitals to Cut Debt
Nu-Med Inc., a struggling Encino-based health care chain that has been trying to reduce its debts and raise cash, agreed last week to sell two of its hospitals to a new company headed by its former president.
The 156-bed Sherman Oaks Community Hospital and the 139-bed Nu-Med Regional Medical Center in Canoga Park are to be sold to Triad Healthcare, a new nonprofit corporation to be run by Stuart Marylander, who resigned last week as Nu-Med’s president. The deal, for an undisclosed price, is expected to close by March 1. Goldman, Sachs & Co. has been hired to sell bonds to finance the purchase.
Marylander, who had been with Nu-Med for about two years, said he was attracted by the chance to work again with nonprofit hospitals.
In another development, three representatives of an outside group of Nu-Med shareholders who wanted more say in Nu-Med’s restructuring were elected to the company’s board of directors last month. Howard Berkowitz, Michael Schultz and Will Weinstein are the new board members. Berkowitz was appointed to Nu-Med’s strategic planning committee. In addition, Nu-Med reduced the size of its board from 13 to 10 members.
Berkowitz’s New York investment firm, HPB Associates L.P., owns 9.9% of Nu-Med’s stock. HPB has aligned itself with Allen Holding Inc., another New York investment firm, which owns 9.5% of Nu-Med’s stock. Both companies have taken a sizable paper loss on their investment in Nu-Med.
Berkowitz could not be reached for comment.
Nu-Med’s stock nose-dived 64% in value last year, and it closed Monday at $2.25 per share.
Nu-Med has lost a total of $31.2 million in three consecutive unprofitable fiscal years and has been struggling under heavy debts taken on in the mid-1980s when it went on a hospital buying spree that included hospitals in England. Nu-Med’s long-term debt is about $154 million, up from $30 million in 1984.
Over the past few years, Nu-Med has shifted course and has been selling off its medical assets to cut its debts. Nu-Med operates seven acute-care hospitals and eight psychiatric care facilities in seven states.
Maurice Lewitt, Nu-Med’s chief executive, said sale of the two hospitals to Triad will strengthen the company’s weak balance sheet and ease its immediate cash problems. A third, smaller hospital is also up for sale.
As of Oct. 31, Nu-Med’s liabilities exceeded its assets by $3.8 million. Because of the company’s negative net worth, it is in danger of losing its stock listing on NASDAQ, the primary computerized source of price quotations for the national over-the-counter market.
Nu-Med has been granted a temporary exemption but must raise its net worth to at least $375,000 to keep its listing, said Enno Hobbing, National Assn. of Securities Dealers spokesman. Lewitt said if the Triad sale goes through, Nu-Med would “probably meet” the NASDAQ listing requirements.
If the two hospitals are sold to Triad, Lewitt said, Nu-Med’s annual sales will decline about 30%. In its fiscal year that ended April 30, Nu-Med posted a $7.3-million loss on $278 million in sales. For the six months that ended Oct. 31, Nu-Med lost another $2.36 million on sales of $127 million.
Lewitt said Nu-Med is willing to sell more of its acute-care hospitals “if the deal makes sense,” in hopes of further trimming debts. “We want to get it shrunk until we get a manageable level of debt,” he said.
In its current fiscal year, Nu-Med was to have paid nearly $47 million in interest and principal payments to its lenders, but the company has renegotiated some of its debts.
Meanwhile, the company is still suffering from cash-flow problems and is struggling to pay its trade creditors on time. Nu-Med’s cash flow, Lewitt conceded, “is very tight.”
