GREENERY REHABILITATION GROUP ANNOUNCES A LETTER AGREEMENT WITH HEALTHCARE INTERNATIONAL INC.
GREENERY REHABILITATION GROUP ANNOUNCES A LETTER AGREEMENT WITH
HEALTHCARE INTERNATIONAL INC.
NEWTON, Mass., Nov. 4 /PRNewswire/ -- Greenery Rehabilitation Group, Inc. (NYSE: GRG) today announced that it has entered a Letter Agreement with Healthcare International, Inc. (AMEX: HII) to work toward a recapitalization and plan of reorganization for HII.
In October 1989, GRG loaned HII approximately $9 million secured by HII's leaseholds in three Brown Schools rehabilitation and psychiatric hospitals. Since October 1989 GRG has also acquired certain HII Class B common shares which represent approximately 8 percent of the ownership and 36 percent of the voting power of all HII common shares.
HII's principal creditor and lessor is HealthVest (AMEX: HVT), a health care real estate investment trust. During the past two years, HII and HVT have continued to operate pursuant to a series of interim agreements under which HII made partial payments of the contractual amounts due HVT. In February 1991 HII and HVT announced that they had entered a letter of intent to work toward a merger of HII and HVT. In September 1991, Community Psychiatric Centers, Inc. (NYSE: CMY) made an offer to acquire both HII and HVT and since then HVT has announced its intention to solicit proposals from other interested acquires. Within the past few weeks HVT announced that it had made demand upon HII for payment of past due amounts and HII has recently responded that is considering filing for reorganization under Chapter 11 of the Bankrupcty Code.
The Letter Agreement between HII and GRG provides that these companies will work together to implement a plan of reorganization under Chapter 11 of the Bankruptcy Code to recapitalize HII. The Letter Agreement outlines the terms of the plan to include an acquisition of HVT by HII with funding arranged by GRG. The amount which may be payable to HVT shareholders is left open for negotiations among HII, GRG and HVT, but the Letter Agreement contemplates that all HVT bank indebtedness of approximately $235 million will be paid or assumed in full. The plan outlined in the Letter Agreement provides for settlement of HII's debts in addition to its debts to HVT, including payment of $200 per $1,000 of principal on HII's $29.25 million of 14.375 percent Subordinated Debentures Due in 1995 which are outstanding, and that GRG will work with HII to arrange a new working capital facility of approximately $35 million. The plan outlined in the Letter Agreement further provides for the retirement of all HII Preferred Shares at the rate of $9/Preferred Share or conversion of each HII Preferred Share into 12 shares of HII Class A Common Shares.
The Letter Agreement between GRG and HII also provides that upon consummation of the HII recapitalization and plan of reorganization, GRG's outstanding debt may be converted into shares of HII Class A Common Stock at the rate of 75 cents/shares. All other HII Class A Common Shares and HII Class B Common Shares, including shares of Class B Common Shares owned by GRG will remain outstanding. Based upon the number of HII shares outstanding at present and assuming conversion of all HII Preferred Shares and of all GRG debt into HII Class A Common Shares, GRG would own approximately 62.4 percent of all HII equity outstanding. In addition, GRG would have warrants to increase this ownership further in certain circumstances.
Commenting on this Letter Agreement, Gerard M. Martin, chairman and CEO of GRG issued the following statement:
"The plan for recapitalizing HII is highly complicated. The important thing is that HII and GRG have agreed to a comprehensive plan for approaching HealthVest and various other concerned constituencies. We expect this recapitalization to be implemented as part of a Chapter 11 reorganization by HII. It is possible that specific provisions of this plan may be modified as a result of negotiations with HealthVest and other concerned parties or during the course of the HII Chapter 11 proceedings. However, HII and GRG have agreed to work togther toward goals which we believe are achievable.
"HII's Brown Schools rehabilitation and psychiatric hospitals now generate approximately 55 percent of HII's total revenues. These facilities have continued to provide high quality services to a nationwide base of clients, and have remained profitable on an operating basis despite the financial distress experienced by HII at the corporate level during the past two years. HII's other psychiatric hospitals have experienced the same occupancy and rate pressures which have affected other psychiatric hospitals in recent periods. Nonetheless, HII's psychiatric hospitals provide high-quality patient care in hospitals which are often the most modern physical plants in their respective local markets and we believe they can be strong competitors when their operations are stablized and their capital costs are adjusted to realistic levels. During the past two years, HII has terminated all acute medical-surgical hospitals operations and it is now time that HII focused on settling the debts which resulted from that expansion program."
A GRG spokesman estimated that it may take as long as six months or more to consummate the recapitalization plan outlined in the Letter Agreement between HII and GRG.
Greenery Rehabilitation Group is headquartered in Newton, Mass. Greenery Group operates 13 rehabilitation and skilled nursing facilities that specialize in rehabilitation services to patients who have suffered traumatic head injuries. The Brown Schools rehabilitation programs operated by HII also offer neurological rehabilitation programs to patients with head injuries.
/CONTACT: Gerard M. Martin, chairman, or George M. Ferencik, president, of Greenery Rehabilitation Group, 617-244-4744/
(GRG HII HVT) CO: Greenery Rehabilitation Group; Healthcare International Inc. ST: Massachusetts IN: HEA SU: SH-KM -- NE021 -- 0957 11/04/91 17:43 EST