Health Systems Pays Down Debt to Wellness Group
Health Systems International Inc., the Woodland Hills-based parent of the Health Net health-maintenance organization, said it has obtained a $400-million line of credit and has used a portion of it to make early payments totaling $135 million on debt to the California Wellness Foundation.
The Wellness Foundation is a charitable organization founded by Health Net when the company converted from nonprofit to for-profit status in 1992. Under its deal with state regulators, Health Net agreed to issue to the foundation promissory notes worth $225 million and common stock that currently represents about 52% of Health Systems’ outstanding shares.
After Health Systems’ recent payment and other early payments, the amount remaining on the notes held by the foundation is about $20 million, the company said. Under the terms of the five-year credit facility, Health Systems said it expects to save about $5 million in interest compared to the rates the company would have paid on the notes.
John Van de Kamp, legal counsel to the foundation, said the organization “is delighted with the prepayment, which will permit the foundation to diversify its investment portfolio and give us additional flexibility to enhance our grant-making capacity.”
Malik Hasan, chief executive of Health Systems, said the line of credit, obtained from a lending syndicate led by Bank of America, helps set the stage for Health Systems’ recently announced agreement to merge with another Woodland Hills HMO, WellPoint Health Networks.
