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Health-Care Firm Vencor In Talks To Cut Rental Payments To Ventas
Dow Jones Online News, Thursday, April 01, 1999 at 02:38
(Published on Wednesday, March 31, 1999 at 23:36)
By Chris Adams, Staff Reporter of The Wall Street Journal
Vencor Inc. said that its independent auditor will attach a "going
concern" statement to the ailing health-care company's 1998 financial
results, and that it is in talks to cut rental payments to the company
that separated from it a year ago.
Vencor also said it may have to restate earnings from two quarters
last year, and that its banks have granted a further waiver, through May
28, for certain financial covenants it has violated.
However, since the Louisville, Ky., company hasn't obtained a
permanent agreement with its bank lenders, its auditor, Ernst & Young
LLP, has advised that it will issue a "going concern" statement, Vencor
said. Such statements typically mean auditors question whether the
company can continue as a going concern.
Vencor has yet to release results for the fourth quarter of 1998,
although it has warned they will reflect "significant operating losses."
The company is delaying the filing of its Form 10K with the U.S.
Securities and Exchange Commission as it seeks to revalue its assets and
leases.
In a news release after markets closed, Vencor said it was holding
talks with Ventas Inc., a real-estate concern that owns many of the
buildings in which Vencor operates health-care facilities. Last year,
Vencor split into two companies, one an operating company, the other a
real-estate company, Ventas; Vencor is now Ventas's largest tenant.
The release said Vencor is seeking "possible reductions in the rental
payments" to Ventas. It also said the two sides agreed to postpone until
April 12 "a ny claims either may have against the other, including any
claims Ventas would have for Vencor's decision not to pay rent due on
April 1."
Neither company could be reached for further comment.
Ventas, also of Louisville, said in its own news release late
Wednesday that its 10K contains a "going concern" statement, and cited
the losses at Vencor. Ventas said it could be hurt by the serious
problems at Vencor, which provides 99% of Ventas's revenue; in addition,
Ventas has a $275 million bridge loan due Oct. 30.
"The company's auditors have concluded that these matters raise
substantial doubts about the company's ability to continue as a going
concern," Ventas said. It added that it has rejected Vencor's request
for interim rent concessions.
The dispute between Vencor and Ventas is unusual because the
companies are so intertwined and because Ventas's chairman, Bruce
Lunsford, is the executive who founded and ran Vencor until earlier this
year.
Vencor's profits and stock price have plunged in recent quarters.
Although the company made its name as a highly profitable operator of
specialty hospitals, it struggled recently with changes in Medicare
reimbursement, an ambitious acquisition of a much-larger nursing-home
company, and government investigations.
Vencor was criticized last year for an aborted attempt to evict
Medicaid patients from its homes. It suffered late last year with
declining admissions and profits in its nursing homes, as well as
increasing problems with its quality of care.
Vencor's shares, which had fallen below $1 from a 52-week high of
more than $12, closed unchanged at $1.3125 in New York Stock Exchange
composite trading Wednesday. Ventas rose 75 cents to $6 on the Big
Board.
Copyright (c) 1999 Dow Jones & Company, Inc.
All Rights Reserved.
Companies or Securities discussed in this article:
Symbol Name
NYSE:VC Vencor Inc (New)
NYSE:VTR
© 1999 Quote.com, Inc. All Rights Reserved.
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Bought some of this fine Ventas at 4 5/16. Why not? Bad news are out. |
