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HILLHAVEN ANNOUNCES MAJOR RESTRUCTURING TO IMPROVE ITS LONG-TERM FINANCIAL AND OPERATING PERFORMANCE

 HILLHAVEN ANNOUNCES MAJOR RESTRUCTURING
 TO IMPROVE ITS LONG-TERM FINANCIAL AND OPERATING PERFORMANCE
 TACOMA, Wash., Dec. 5 /PRNewswire/ -- The Hillhaven Corp. (AMEX: HIL) today announced a major restructuring to improve the company's long-term financial strength and operating performance.
 The restructuring includes:
 - Disposition of 82 of Hillhaven's 342 nursing centers, representing approximately 10,000 of its 42,442 beds, and recording a second-quarter restructuring charge of $90 million to reflect the estimated losses from the disposition;
 - Restructuring of the leases of the National Medical Enterprises Inc.-owned nursing centers to eliminate contingent rent provisions that had limited Hillhaven's net earnings since the spin-off from National Medical Enterprises Inc. (NME) in 1990 and the acquisition of nine nursing centers, currently leased from NME, for $25.5 million;
 - Sale of $35 million of 8-1/4 percent cumulative, non-voting preferred stock to NME.
 Bruce L. Busby, Hillhaven's chief executive officer, described the actions as "part of a comprehensive program to eliminate the contingent rent paid to NME and restructure the company's operations to focus its efforts on markets and services that offer the best opportunities for future profitability."
 Busby said the comprehensive program involves a three-part process: "First, the acquisition of nine nursing centers from NME, and the restructuring of leases on the remaining 76 NME-leased nursing centers to eliminate contingent rent provisions; second, selective divestiture of nursing centers and related reductions in overhead expenses; and third, renewed focus on the higher margin specialty areas of rehabilitation services, Alzheimer's care and pharmacy services.
 "These specialty areas have realized a compounded growth rate in excess of 30 percent over the last three years and will be instrumental in improving our future performance."
 Sale of Nursing Centers
 Hillhaven plans to dispose of 82 of the 342 nursing centers that it owns or leases. The company is currently in negotiations with various nursing industry operators and has reached preliminary agreement to sell 13 of the nursing centers. Hillhaven anticipates that the disposition of the remaining centers will be completed within the next 24 months, subject to various governmental approvals.
 Second Quarter Restructuring Charge
 As a result of its decision to dispose of over 20 percent of its nursing centers, the company will record a $90 million pretax charge against earnings in the second fiscal quarter which ended Nov. 30, 1991. Results of the quarter are expected to be announced in early January 1992.
 The charge includes provisions for the estimated losses on the disposition of these centers, operating losses during the disposition period and other costs related to the disposition of the nursing centers.
 Acquisition of Nine Leased Nursing Centers
 Hillhaven has exercised its options to acquire nine nursing centers currently leased from NME. The aggregate purchase price is $25.5 million. Terms call for 90 percent financing to be provided by NME at interest rates beginning at 8.4 percent and escalating annually with an 11-percent cap. The closing of the purchase, which is expected to occur in June 1992, is subject to various regulatory approvals.
 These acquisitions continue Hillhaven's previously announced strategy of acquiring nursing centers that are operated under lease agreements. Since July 1990, Hillhaven has purchased 42 nursing centers that were previously leased from NME and others for approximately $211 million.
 Restructuring of Leases of 76 Nursing Centers
 Hillhaven reported that it has entered into a letter of intent with NME to restructure the lease terms of the remaining 76 nursing centers leased from NME. Effective Dec. 1, 1991, Hillhaven's contingent rent obligation to NME, which had the effect of limiting pretax earnings, prior to real estate gains or losses, to $1 million annually, will be eliminated.
 The agreement will also provide that NME may require Hillhaven to purchase any or all of the centers through May 31, 1998. Hillhaven will have two, one-year purchase options on the remaining unpurchased centers commencing June 1, 1998. NME will provide 90 percent financing at interest rates beginning at 8.4 percent and increasing to a fixed 11 percent for centers purchased through May 31, 1998, and from June 1, 1999, through May 31, 2000. The purchase prices will be fixed at the option prices currently in effect.
 "We have revised our previously announced plans to acquire these centers within 18 months as the new arrangement eliminates contingent rent and provides for financing." Busby said. "We expect to enter into a definitive agreement which will restructure the lease terms before Feb. 28, 1992."
 Issuance of $35 Million in Preferred Stock
 The company has issued $35 million in 8-1/4 percent cumulative, non-voting preferred stock to NME. The proceeds of this sale have been used to prepay to NME $35 million in indebtedness that currently carries a 10-percent annual interest rate.
 Hillhaven will continue to be the nation's second largest long- term care provider following the restructuring. In addition to its 342 nursing centers, Hillhaven also operates 25 retirement housing communities, two continuing care retirement communities and 119 retail and institutional pharmacies.
 -0- 12/5/91
 /CONTACT: Tim Carroll of the Hillhaven Corp., 206-572-4901/
 (HIL) CO: The Hillhaven Corp. ST: Washington IN: HEA SU: RCN


LM-JH -- SE001 -- 9470 12/05/91 07:48 EST
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Date:Dec 5, 1991
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