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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: Sharck who wrote (32483)	8/3/2001 2:58:14 PM
From: puborectalis	Respond to of 37746

BEOS interday spike...?takeover....http://finance.yahoo.com/q?s=BEOS&d=c&k=c4&t=1d

To: Sharck who wrote (32483)	8/3/2001 4:40:47 PM
From: 2MAR$	Respond to of 37746

Standard & Poor's Places PHSY Systems 'BB-' Ratings on WatchNeg ( this one a short if it goes much higher) NEW YORK, Aug. 3 /PRNewswire/ -- Standard & Poor's today placed on CreditWatch with negative implications its double-'B'-minus issuer credit, senior secured debt, and senior unsecured debt ratings on PacifiCare Health Systems Inc. (PacifiCare). At the same time, Standard & Poor's withdrew its preliminary bank loan and debt ratings, which it assigned on June 27, 2001, to PacifiCare's proposed senior secured $150 million bank line, $350 million senior secured term loan, and $500 million senior unsecured notes due 2011. The ratings placed on CreditWatch affect about $705 million outstanding on the bank loan and $100 million of senior debt. Standard & Poor's took this rating action following PacifiCare's announcement that it was terminating this debt financing as well as its tender offer for $100 million of outstanding notes. The financing was intended to replace PacifiCare's bank loan, which expired in January 2001. Standard & Poor's expects PacifiCare to come up with an alternative method of repaying or extending its existing credit facility, perhaps at terms less favorable than under its initial debt-refinancing plan. However, this does place additional liquidity pressure on the company. Major Rating Factors: -- Although PacifiCare is profitable, its earnings in 2000 and 2001 have been negatively affected by the transition in some of its contracts with providers. This has occurred primarily in its commercial health plan operations and largely stemmed from a change from capitated to shared-risk contracts with California hospitals in its networks. -- On May 30, 2001, PacifiCare announced lower revised earnings projections for 2001. The revised expectations of EBITDA of $350 million and net income of $56 million-$59 million for the year ended Dec. 31, 2001, are not inconsistent with Standard & Poor's expectations in November 2000, when Standard & Poor's lowered its issuer credit rating on PacifiCare to double-'B'-minus from double- 'B'-plus. Full-year 2000 EBITDA was $498 million. -- Although earnings issues have also reduced the flexibility of PacifiCare's operating companies to produce cash for the consolidated organization, Standard & Poor's believes each regulated unit will meet regulatory requirements for statutory capital over the next few years. However, Standard & Poor's considers PacifiCare's consolidated statutory capitalization (regulated entities only), based on Standard & Poor's proprietary capital adequacy model, to be marginal. -- Pretax interest coverage will be about 2.5 times in 2001. PacifiCare's debt-to-total-capital ratio as of June 30, 2001, was 28.4%. Although this ratio is good, it could be subject to variability because PacifiCare carries about $2.2 billion of goodwill and other intangibles on its balance sheet, which is an aggressive 80% of capital. The goodwill is being amortized over periods ranging from three to 40 years and primarily reflects the operations in the Western region, including California. About half of this goodwill, held at regulated entities, is generally not recognized as an asset under statutory accounting principals. Any future goodwill writedowns related to unprofitable markets could affect the company's debt leverage. -- Short-term liquidity remains good, with free cash flow projected to be about $150 million in 2001. This projection assumes that the existing bank facility is successfully renegotiated and that medical claim trends do not continue to exceed premium yields projected by the company. -- PacifiCare holds a strong business position as a regional managed care organization. With 3.7 million members as of June 30, 2001, PacifiCare operates HMOs in eight states, with key market shares in California, Colorado, Oklahoma, Arizona, and Texas. PacifiCare covers more than 1 million members in its Medicare+Choice programs. The company has historically had a strong position in the Medicare Risk marketplace, but this product design has relied on capitated contracts. Historically, it also focused on strict HMO products and is now building preferred provider organization capacity to broaden its product range and respond to market needs. Standard & Poor's expects PacifiCare's 2001 EBITDA to be close to its announced expectations, but there is potential for significant variation. The company is expected to continue to meet regulatory capital requirements in all states. Enrollment is expected to decline somewhat because of the company's efforts to repair its earnings and because of exits from certain Medicare markets. Standard & Poor's believes the company is in a transition period, during which it is putting various systems into effect to manage health care utilization and costs, tasks that were previously assumed under the capitated contracts by providers. Standard & Poor's will review the ratings once the company has completed its alternative refinancing plans. -- CreditWire SOURCE Standard & Poor's -0- 08/03/2001 /CONTACT: Jack Reichman of Standard & Poor's, +1-212-438-7235/ /Web site: standardandpoors.com CO: Standard and Poor's; PacifiCare Health Systems Inc. ST: New York IN: PUB INS