PacifiCare Shares Drop 10% as Debt Plan Fails

PacifiCare Health Systems Inc.’s shares fell 10% Thursday after a plan to raise $1 billion in debt collapsed for the managed health-care company.

The Santa Ana company’s shares fell $1.58 to $13.90 in Nasdaq trading. The shares have lost 77% of their value in the last 12 months.

Morgan Stanley Dean Witter & Co. failed to sell $600 million in PacifiCare junk bonds because investors were concerned about the company’s rising medical costs, bankers familiar with the issue said Wednesday. PacifiCare wanted to sell the bonds and arrange a $400-million loan to refinance $705 million in bank debt that matures in January and $100 million in senior notes.

PacifiCare has had trouble forecasting earnings as it battles medical costs since renegotiating contracts with doctors and hospitals in California to base payments on the cost of care rather than fixed monthly fees.