PacifiCare Lenders Agree to Extend Credit Maturity Date

PacifiCare Health Systems Inc., which dropped plans last month to refinance its debt with new creditors, said Tuesday that its current lenders have agreed to extend the due date of its $800-million credit package by one year.

The Santa Ana managed-care company, the nation’s biggest operator of Medicare health plans, said in a news release that it will pay 1% of the debt, or $8 million, as a fee to amend the credit agreement.

The new arrangement, which extends the maturity date to Jan. 2, 2003, provides PacifiCare with a $650-million term loan and a $150-million revolving line of credit.

The revised deal resolves for now an issue that had been gnawing at the company as it works through difficult financial times. Last month, it disclosed that its effort to refinance the debt collapsed because of investor concern over rising costs.

“The new agreement gives us additional time to continue focusing on advancing our strategic objectives, as well as the flexibility to take advantage of improved market conditions down the road,” said Chief Executive Howard Phanstiel, PacifiCare’s chief executive.

Bank of America Securities, Citigroup and JP Morgan Securities Inc. are acting as co-lead arrangers on the new credit agreement.

PacifiCare has been struggling with higher medical costs as it renegotiated contracts to make payments to doctors based on actual costs rather than on fixed monthly fees. In the second quarter, the company’s net income fell to $15.3 million, or 45 cents per share, compared with $69 million or $1.96 a share a year ago. Its medical care ratio, the percentage of medical care costs to premiums, rose to 89.9% from 85.8% in last year’s second quarter.

Reuters was used in compiling this report.