PacifiCare Offers to Sell Shares to Slash Debt
PacifiCare Health Systems Inc. shares fell nearly 11% Monday after the health insurer, the biggest operator of Medicare health plans, agreed to sell up to $150 million in stock to reduce its bank debt.
The Santa Ana-based company will sell as many as 6.9 million shares to Acqua Wellington North American Equities Fund Ltd. over 18 months, according to a Securities and Exchange Commission filing. Shares fell $1.90 to $16.15 on Nasdaq.
PacifiCare said it would use the proceeds to cut its debt. The company refinanced almost $800 million in bank debt last year after failing to raise $1 billion in new debt through junk bonds and bank loans. Most of the debt is due in January 2003.
Under terms of PacifiCare’s loans, the firm has to cut bank debt by $250 million by March 31 or the interest rate will rise by 1 percentage point, according to Credit Suisse First Boston Inc. analyst Joseph France, who has a “sell” rating on the stock.
The debt stands at $705 million and the company is unlikely to make the March target, France said in a research note.
The transaction would increase PacifiCare’s outstanding shares by about 20% if Acqua Wellington buys all the shares it can purchase under the agreement, PacifiCare said in the SEC filing.
