PacifiCare Begins Refinancing Effort

Two days after cutting its fiscal earnings outlook for the year, PacifiCare Health Systems Inc. began an all-cash tender offer for $100 million in bonds as part of a plan to refinance $700 million in borrowings from its line of credit.

The Santa Ana managed-care company said it is negotiating to roll over both debts into a new credit line.

The bonds, due to mature in September 2003, were inherited with the company’s 1997 acquisition of FHP International Inc. in Fountain Valley, said PacifiCare spokesman Dan Yarbrough.

The bonds are currently trading at a discount from face value, and the company is offering holders a premium that would give them more than 100% of their money back, he said. Under a formula based on market conditions Thursday, the company would be paying bondholders about $104 for every $100 invested.

PacifiCare’s current line of credit, for $950 million, must be refinanced because it matures Jan. 1, Yarbrough said. So the company decided to take that opportunity to fold in the bond debt.

The company did not provide details on talks over the new credit line.

On Wednesday, the company lowered its annual earnings forecast as much as 43% to a range of $1.65 to $1.75 a share. In April, the company said it expected to earn $2.94 a share for the year.

The company’s stock, which hit a three-month low Thursday, bounced back Friday, gaining $1.15 to close at $18.87 a share on Nasdaq.