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

To: DRRISK who wrote (1162)	2/26/1998 9:58:00 PM
From: Raptor	Read Replies (2) \| Respond to of 2068

To all: I am short and will remain short the stock. I will give you some quantitative reasons. At the end of 1997, the company had roughly $320 million of stockholders equity, after writeoffs. If you look at the fourth quarter numbers, and adjust for reserve additions, extraordinary administrative expenses, and capital gains, it appears that the company was losing money on an operating basis at a $100 million per quarter rate. Assuming that no material operational improvement takes place in the first quarter (let's face it, 1998 pricing is already fixed, computers are still not fixed, and all employees are stunned and distracted by what's happening), that would bring stockholders equity down to $220 million. Add in the $350 million equity infusion, gives $570 million in capital at March 31. This company does $4.4 billion in annualized premiums, giving a premium to capital ratio of 7.7 times. This is well above the 4-1 maximum that regulators are generally comfortable with. Therefore, the company MUST raise another nearly $600 million in additional capital, and quickly, or risk being thrown into receivership. Furthermore, the $350 million equity financing is CONTINGENT on the closing of the 'debt' deal. I don't think a debt offering is sufficient to meet regulators' capital requirements, so it may well have to be some other sort of equity convertible deal. Remember, LISTEN TO THE TERMS of the TP equity investment: it doesn't even happen unless more money, ie, the 'debt' deal, is completed. AND EVEN THEN the TP group has the right to reset their strike price up to a year from now. And oh, by the way, their preferred stock is a senior security to your common, so in a liquidation, they get paid before you. In addition, if you do an option valuation of the warrants, which were just handed out with the preferred stock, it makes the effective yield on the preferred roughly 10.7%, not 8%. This is by subtracting the approximate $4 per share warrant value from the $15.5 price on the preferred. This deal looks great for TP, so far superior to a common stock investment that one can understand their desire to do it. My point is that if the financial situation that I have outlined is correct, there may end up being no way out for the company. Somebody better step up and soon to provide additional funds or it is curtains for the common shareholder. The NY State Insurance Commission will be watching carefully, and will be forced to step in if they feel the customers and doctors will be harmed. Finally, and this situation doesn't really need more negatives, what if members (patients) become nervous about the company's financial condition, and decide to get things done sooner rather than later, before benefits get reduced and/ or the company raises co-pays or other patient costs? This is more costs to Oxford. This is why I am short. Upside potential is non-existent, and the doomsday scenario is plausible in the near future. If they can secure financing to remain solvent, they will be hampered with so much interest/ dividend expense plus operating losses at today's existing capital structure that profits will be a mere dream perhaps until the year 2000. I think I'll have time to cover my short. Good luck to all.

To: DRRISK who wrote (1162)	2/26/1998 10:47:00 PM
From: Premier	Read Replies (2) \| Respond to of 2068

Heard on Blumberg radio that Oxford has pulled out of Medicaid business in CT. The broadcaster speculated that Oxford may soon quit medicaid in New York as well. One Yahoo poster pointed to an internal e-mail about layoffs in Philadelphia. He thought that this was negative. IMHO, elimination of fat from administrative expense is positive. NYS insurance department is holding public hearing on March 10 regarding Oxford's request for rate increase on individual policies. The increase is to be effective April 1, 1998. The request calls for 55% increase. Even this increase Oxford premiums will be lower than Empire Blue Cross in New York market. On a separate note, Pataki administration will pay Oxford $50MM as subsidy to keep consumers' cost down. Overall, I sense that Payson & Co. is not wasting time on lunches with investment bankers but it is cleaning up Oxford's operations. Premier