PacifiCare Announces Charge, Restructures Debt

By Staff Writer

April 19, 2002 at 08:00 PM

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NU Online News Service, April 19, 1:29 p.m. – PacifiCare Health Systems Inc., Santa Ana, Calif., says it will be taking a one-time, $897 million, non-cash charge to adjust the "goodwill" value of past acquisitions carried on its books.

PacifiCare, a large managed care company, is taking the goodwill charge to comply with a new accounting rule that regulates the methods public companies use to account for acquisitions.

In a separate announcement, PacifiCare says its lenders have agreed to push the maturity of $735 million in debt back two years, to January 2007, from January 3, 2005.

To qualify for the extension, PacifiCare must pay off at least $203 million in revolving debt before Jan. 2, 2003. The lenders will also reduce the borrowing capacity of PacifiCare's revolving debt account by $47 million.

A corporate revolving debt account is the corporate equivalent of a credit card account.

The lenders will be replacing the old credit package with a new package that includes a $593 million term loan and a $142 million revolving line of credit, PacifiCare says. The interest rate will increase to 5 percentage points over the LIBOR interest benchmark, up from 4.5 percentage points over LIBOR.

The lenders handling the arrangement are units of Bank of America Corp., Charlotte, N.C.; J.P. Morgan Chase & Company, New York; and Citigroup Inc., New York.

PacifiCare is supposed to start making quarterly $25 million payments July 2. The company says it has already paid down some of its debt to the lenders and can afford to make the other required payments using cash from operations.

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