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Biotech / Medical : FPA Medical Management - FPAMQ -- Ignore unavailable to you. Want to Upgrade?

To: cicak who wrote (968)	7/20/1998 4:12:00 AM
From: Richard D	Read Replies (2) \| Respond to of 1110

It's a wrap! July 20, 1998 1:00 AM DOW JONES ONLINE NEWS TROUBLED PHYSICIAN-MANAGEMENT FIRM FPA SEEKS CHAPTER 11 PROCEEDINGS By Peter Gumbel, Staff Reporter of The Wall Street Journal After four years of exponential growth, FPA Medical Management Inc., an acquisitive physician-management company that ran into acute liquidity problems, filed for bankruptcy-court protection. The San Diego-based company hopes it will be able to reorganize its operations fairly rapidly, thanks to a commitment by creditors to put in more money during the process. But the move will wipe out shareholders' equity and is likely to infuriate doctors, some of whom FPA stopped paying months ago, and other suppliers. Company officials and others familiar with the situation said FPA filed its petition to reorganize under Chapter 11 proceedings early Sunday with the U.S. Bankruptcy Court in Wilmington, Del. Judge Peter Walsh is expected to hold the first hearing Monday. Even before the filing, FPA had been holding talks with some of its key creditors and big health-maintenance organizations with whom it has contracts, and moving rapidly to close down unprofitable operations. Just this month, it announced plans to shut several dozen medical facilities in Arizona, Nevada, parts of North Carolina, Texas, California and Georgia. The company says such measures should lead to annual cost savings of about $25 million. Including the facilities slated for closure, FPA handles about 1.4 million patients. Crucially, FPA's 21 creditor banks have agreed to commit as much as $50 million in so-called debtor-in-possession financing, according to people familiar with the situation. This financing, which is subject to court approval, will enable FPA to pay doctors, other suppliers and employees during the bankruptcy proceedings. "We do not anticipate any significant disruption to the care of patients," said Stephen J. Dresnick, who took over as FPA's chief executive in March and was also made chairman recently. He said that, in areas where the company is pulling out, FPA is working with health plans to ensure patients can be transferred to other plans "in an orderly fashion." FPA's bankruptcy reorganization plan calls for as much as 40 million shares of a new common stock to be issued, of which 20 million shares will be distributed to senior creditors. Unsecured creditors would receive warrants for about 3% of the new stock to be issued under the plan, while management would be able to acquire 8% under a stock-option program, company officials said. The company expects to file a full reorganization plan by Sept. 30 and aims to emerge from Chapter 11 protection by Dec. 31. "We're pretty comfortable that the core businesses we identified going forward are all profitable," Dr. Dresnick said. The filing comes as little surprise. FPA signaled its own demise two months ago by disclosing that it had virtually run out of cash at the end of March. The company last week missed the final deadline for a $2.6 million interest payment. FPA shares, which traded as high as $40 last October, have collapsed, closing Friday at 71.9 cents, up 9.375 cents on the day, in Nasdaq Stock Market trading. The company already faces several lawsuits from irate shareholders. As of March 31, the most recent financial data available, FPA's assets had a book value of about $1 billion and liabilities totaling $797 million. Of that debt, some $315 million is owed to bank creditors and about $83 million to bondholders. Healthcare services -- which have been provided but not yet paid for -- account for much of the rest of the liabilities. Despite the fresh financing FPA expects from its bank creditors, the bankruptcy process is sure to be arduous and fraught with uncertainties. An informal committee of bondholders has been established, and creditors are expected to meet early next month to hash out who gets how much. In order to keep operating, FPA is seeking to provide an incentive to doctors who continue working with the company. Officials say the company is seeking permission to pay claims that were outstanding before the filing, as well as claims thereafter. The continued support of these doctors is deemed critical to the survival of the company. However, officials familiar with the situation expect an angry response from doctors and others in markets where the company is pulling out. "We expect some level of noise from the markets we're exiting," said one person familiar with the situation. Copyright (c) 1998 Dow Jones & Company, Inc. All Rights Reserved.