NME Suspends Dividend Due to Expected Write-Off

Beleaguered National Medical Enterprises Inc. suspended its dividend Wednesday as a result of a large write-off the company expects to record in its current quarter.

The Santa Monica-based hospital chain did not disclose the size of the write-off. The action is being taken because it has become clear that prospective buyers of some assets National Medical wants to sell are not going to pay anywhere near book value for them, company executives said.

As a result, National Medical will have to devalue those assets on its books, resulting in a hit to its earnings.

The expected write-off triggered suspension of the dividend Wednesday because new covenants in the hospital company’s bank loan agreements require that dividends paid to shareholders cannot exceed 43% of the company’s net earnings in the second quarter ending Nov. 30. National Medical has been paying a dividend consistently since the 1970s, most recently a quarterly payout of 12 cents a share.

National Medical is known to be trying to sell some of its psychiatric and rehabilitation hospitals. The company’s biggest problem is a lingering federal criminal investigation centering on its psychiatric hospital operations. The company has said it is trying to settle with the government.

Trading in National Medical shares on the New York Stock Exchange was halted Wednesday before the announcement. The last trade was at $11.125, down 25 cents from Tuesday.