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Biotech / Medical : Oxford Health Plan (OXHP) -- Ignore unavailable to you. Want to Upgrade?

To: mg1041@aol.com who wrote (1079)	2/20/1998 4:09:00 PM
From: Worswick	Read Replies (1) \| Respond to of 2068

You heard it here first! For private use only Oxford deal seen near, analysts dub it no panacea By Ransdell Pierson NEW YORK, Feb 20 (Reuters) A financing deal between Oxford Health Plans Inc (OXHP - news) and buyout firms Texas Pacific Group and Kohlberg Kravis Roberts & Co expected to be announced within days will soothe but not cure the company's financial ills, Wall Street analysts said. ''They're moving toward an agreement which could come by early next week,'' said a source familiar with negotiations between Oxford and the private buyout firms. The source said the two firms were poised to collectively provide Oxford ''$600 million or higher'' in equity and loans for a 15 percent to 20 percent stake in the Connecticut-based health maintenance organization. ''Clearly a good amount of cash will go in the first day,'' the source said, confirming reports the parties have settled on appointment of Dr. Norman Payson as chief executive of Oxford. Payson, a physician, was chief executive of Healthsource Inc until the HMO was sold last year to CIGNA Corp [NYSE:CI - news] for $1.7 billion. ''I would view the financing as essentially a Band-Aid for Oxford. It buys them another 12 months to turn around their problems,'' said Furman Selz analyst Robert Hoehn. Oxford warned in December it expected to have a fourth quarter net loss of $120 million amid billing and data problems stemming from snags in a year-long installation of a new computer system. Its financial crunch worsened after the New York State Insurance Dept, concerned about Oxford's backlog of unpaid claims to doctors and hospitals, required the HMO the same month to boost its reserves for medical claims by $164 million. Hoehn said the infusion of capital from Texas Pacific Group and KKR might not even carry the company through 1998 if New York and other states in which Oxford operates again increase reserve requirements. ''If Oxford's unpaid medical claims end up higher than they've estimated and they have to pay fines or post additional reserves, that could eat into their capital quickly,'' Hoehn said. Morgan Stanley analyst Todd Richter said Oxford's true financial picture will not be detectable until fourth quarter earnings are released, probably by February 26. ''If they lose $120 million in the quarter like they've predicted, the $600 million in new financing will take them a long way. But if they lost $400 million, it takes them a lot less far. We also need to know what their financial projections are,'' he said. ''And Oxford over the past few months seems to have increased the amount of money it's trying to raise, from rumors of $200 million, then to $400 million and now $600 million. That leads me to believe their financial situation is worse than they expected,'' Richter said. He said he believed Oxford was a very fixable asset, however, adding that the involvement of the cost-conscious buyout firms boded well. ''The key to fixing Oxford is taking a financial discipline to the business, something Texas Pacific and KKR are terrific at,'' Richter said. He said another key to restoring Oxford's health was appropriately pricing coverage for its approximately two million policyholders. ''You can bet that Texas Pacific and KKR will make sure that takes place,'' he said. NB. Texas Pacific group includes Robert Bass perhaps the smartest investor in Texas after Richard Rainwater. Or, perhaps they are equal. You can bet they would never put the money in if it wasn't worth a 35% return, or better. The strange thing, to me at least is that going backwards through ten years of deals, these are buyout firms not banks. HMMM. Ideas? --------------------------------------------------------------------------------