Tom, Just popped upon the news wire...
FPA In Advanced Negotiations With Bank Group On New Financing;
Business Wire - June 22, 1998 08:46
%FPA-MEDICAL-MGMT FPAM UAH %CALIFORNIA %INSURANCE %MEDICINE V%BW P%BW
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SAN DIEGO--(BUSINESS WIRE)--June 22, 1998--
Talks Detail Plan For Additional Cash Flow Improvement; Thomas Allison, Arthur Andersen Recovery Services Partner, Named CFO
FPA Medical Management, Inc. (NASDAQ:FPAM) today said that it is in advanced negotiations with its senior bank group to obtain additional financing, waiver and modification of bank agreement covenants for the remainder of 1998 and an agreement from the banks to release certain collateral in specific states to facilitate FPA's orderly exit from unprofitable markets through negotiated transactions. The senior level negotiations, which began in earnest over the last 10 days, are scheduled to continue Monday in New York City.
The Company said that its proposal to the bank group includes an expanded cost and profit enhancement program which would include the paring of some assets and would result in a substantial improvement in cash flow. The Company told the banks last week that the new management team's strategic plan, which is contingent upon the continued support of the banks, payors and providers, should result in the Company turning around its negative cash flow during the third quarter of 1998 and preserving the core business of FPA. While FPA wouldn't reveal the details of its cash flow improvement plan, it did say that the plan does provide for FPA to significantly reduce the backlog of past-due obligations.
The Company also stated that it has no present intention of seeking Chapter 11 reorganization relief, although it may consider the possibility of a prepackaged Chapter 11 case later this year to restructure its capital structure as part of its discussion with banks and strategic investors.
Separately, FPA announced the appointment of Thomas J. Allison as Executive Vice President and Chief Financial Officer, effective July 1, 1998. Mr. Allison, a partner of Arthur Andersen LLP's Corporate Recovery Services Practice, has been working with the Company as a consultant since June 6, 1998. He succeeds Douglas Kerner, who has left the Company to pursue other opportunities. Mr. Kerner joined the Company as Treasurer in February 1998 and was acting Chief Financial Officer since March 1998.
Stephen J. Dresnick, MD, FACEP, who was appointed President and Chief Executive Officer of FPA 13 weeks ago on March 26, 1998, said that the cost improvements detailed to the bank group were in addition to those announced in May of this year which are expected to achieve annual savings in excess of $25 million.
"With the cooperation of our lenders and our business partners and the continued hard work and dedication of our employees, I am optimistic that we will be able to return this company to profitability," Dr. Dresnick said. "The liquidity problem we forecast for the end of this fiscal quarter and announced last month is clearly upon us and must be resolved. The new management team has developed the right strategic plan for FPA and its stakeholders, but our payors, health care providers and creditors must give us a reasonable period of time and support in order to implement our turnaround plan."
Commenting on Mr. Allison's appointment, Dr. Dresnick said, "Tom Allison's experience and expertise in both financial matters and turnaround situations will significantly benefit the Company. He is not only a skilled professional, but an outstanding manager. He will add an important dimension to our management team."
In addition to his experience at Arthur Andersen, where Mr. Allison has been involved in turnaround situations in a variety of industries -- from high tech to general manufacturing -- he has served as a vice president of a major money center bank, representing the bank in a number of reorganizations, including Chrysler Corporation, Wickes Companies and Massey Ferguson. Most recently, Mr. Allison has served as Chief Financial Officer of United American Healthcare (NYSE: UAH), since January 9, 1998, where he planned and implemented that healthcare organization's successful turnaround. His career spans more than two decades in reorganizations and workouts and has included negotiating loan agreements, credit analyses, the placement of debt instruments and facilitating various financing vehicles.
Mr. Allison is President-elect of the Association of Certified Turnaround Professionals, is past-Chairman of the Turnaround Management Association and has served as an advisor to President Clinton's National Economic Council.
This Press Release contains statements which constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" in this Press Release include the intent, belief, or current expectations of the Company and members of its senior management team with respect to the timing of, completion of and scope of the current strategic business plan, bank financing, and the public or private offering of debt and/or equity securities, debt and equity market conditions and the Company's future liquidity, as well as the assumptions upon which such statements are based. While the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Press Release include, but are not limited to, further adverse developments with respect to the Company's liquidity, position, or operations of the Company's various businesses, adverse developments in the Company's efforts to renegotiate its funding and adverse developments in the bank financing or public or private markets for debt or equity securities, or adverse developments in the timing or results of the Company's current strategic business plan, the difficulty in controlling health care costs and integrating new operations, the ability of the Company to realize the anticipated general and administrative expense savings and overhead reductions presently contemplated, the ability of the Company to return the Company's operations to profitability, the level and nature of any restructuring and other one-time charges, the difficulty in estimating costs relating to exiting certain markets and consolidating and closing certain operations, and the possible negative effects of prospective health care reform. Additional factors that would cause actual results to differ materially from those contemplated within this Press Release can also be found in the Company's Form 10-Q for the quarter ended March 31, 1998 and the Company's Form 10-K for the year ended December 31, 1997.
CONTACT: Sitrick and Company
Michael Sitrick or Steven Seiler
310/788-2850
or
John Grimaldi, 212/755-2850
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