SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Sierra Health Services, Inc.
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(Exact name of registrant as specified in its charter)
December 15, 2000
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Date of Report (Date of earliest event reported)
Nevada 1-8865 88-0200415
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2724 North Tenaya Way, Las Vegas, Nevada 89128
(Address of principal executive offices) (Zip Code)
(702) 242-7000
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
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On December 15, 2000, Sierra Health Services, Inc. ("Sierra")
entered into an Amended and Restated Credit Agreement with a syndicate of banks
for which Bank of America, N.A., is the Administrative Agent and Issuing Bank.
Other lenders include First Union National Bank, Deutsche Bank, AG, Credit
Lyonnais, Bank One, N.A., Wells Fargo Bank, N.A., and Union Bank of California,
N.A. The new credit agreement amended Sierra's preceding credit agreement, which
Sierra entered into in 1998. Sierra was not in compliance with the terms of the
financial covenants in the preceding credit agreement and received a notice of
default from its lenders on November 8, 2000 with respect to this
non-compliance. As of the date of this report, Sierra is in compliance with the
covenants under the Amended and Restated Credit Agreement.
Revolving Loans
The new credit agreement provides Sierra with a revolving
credit facility of $185 million. The proceeds from revolving loans under the
revolving credit facility may be used for general working capital and general
corporate purposes. As of the date of this report, the facility was fully drawn.
The available amounts which Sierra can borrow under the credit
facility will be reduced by specified amounts, on certain dates. If the total
amount of outstanding loans exceeds the availability under the credit facility,
as reduced, Sierra will be required to immediately prepay 100% of the excess
amount.
Under certain additional circumstances, Sierra would be
required to make prepayments of the loans, and the amount available to Sierra
under the revolving credit facility would be reduced. For example, 80% of any
excess cash flow that Sierra has in each year must be applied to a repayment of
the loans and a reduction of the amount available under the revolving credit
facility. In addition, if Sierra or a subsidiary of Sierra (other than an HMO
subsidiary and certain other subsidiaries) engages in an asset sale or a sale
and leaseback transaction (with the exception of certain assets specified in the
new credit agreement), 80% of the cash proceeds (net of certain expenses) must
be applied to a repayment of the loans and a reduction of the amount available
under the revolving credit facility. Similarly, 80% of the cash proceeds (net of
certain expenses) of certain equity issuances by Sierra's wholly-owned
subsidiary, CII Financial, Inc., or a subsidiary of CII Financial, Inc. and 100%
of the cash proceeds (net of certain expenses) of a debt issuance by Sierra
(excluding CII Financial, Inc.) must be applied to a repayment of the loans and
a reduction in the amount available under the revolving credit facility.
The credit facility terminates on September 30, 2003. On that
date, Sierra will be required to repay the aggregate principal amount of the
revolving loans outstanding.
Interest
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Under the credit facility, revolving loans will bear interest
at the applicable margin plus the greater of:
* 0.5% per annum above the latest federal funds rate; or
* the per annum prime lending rate of Bank of America, N.A.
The applicable margin is initially 1.75%. However, the
applicable margin may be increased or decreased in certain circumstances.
Fees
In connection with the credit facility, Sierra will pay
certain customary fees, including agents' fees, commitment fees, and amendment
fees.
Covenants
Subject to normal qualifications and exceptions, Sierra has
certain covenants that, among other things, will restrict the ability of Sierra
and its subsidiaries, including CII Financial, Inc., to dispose of assets, incur
indebtedness, pay dividends, make investments, loans or advances, make
acquisitions, engage in mergers or consolidations, or make capital expenditures
and which otherwise restrict certain corporate activities. In addition, under
the senior credit facility, Sierra will be required to comply with specified
financial ratios, as defined in the new credit agreement, including minimum
interest coverage ratios and leverage ratios.
Events of Default
The credit facility may be terminated before September 30,
2003 upon the occurrence of an event of default. Upon the occurrence of an event
of default, with certain limitations, Sierra's obligations under the new credit
agreement which are at that time outstanding may become accelerated. Events of
default under the credit facility consist of customary specified events. A
default in payment on the debentures issued by CII Financial, Inc. would
constitute an event of default. A bankruptcy proceeding or other similar event
involving Sierra would also constitute an event of default.
Security
The payment and performance of Sierra's obligations under the
credit facility are secured by:
* liens on substantially all of Sierra's assets and the assets
of Sierra's subsidiaries, other than CII Financial, Inc. and
Sierra's other regulated subsidiaries;
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* a guaranty of Sierra's obligations thereunder by each of
Sierra's subsidiaries, including CII Financial Inc., but
excluding Sierra's insurance subsidiaries and its
other regulated subsidiaries; and
* other collateral arrangements, subject to pledge agreements,
the security agreements, deeds of trust, and similar
agreements between Sierra, Sierra's subsidiaries, and the
lending banks.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
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(c) Exhibits.
Exhibit No. Exhibit
1 Amended and Restated Credit
Agreement, dated as of
December 15, 2000, among
Sierra Health Services,
Inc., as Borrower, Bank of
America, N.A., as
Administrative Agent and
Issuing Bank, First Union
National Bank, as
Syndication Agent, and
the other financial
institutions party hereto
(including exhibits)
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Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SIERRA HEALTH SERVICES, INC.
By: /S/ PAUL H. PALMER
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Paul H. Palmer
Vice President of Finance,
Chief Financial Officer and
Treasurer
(Principal Financial and
Accounting Officer)
Dated: December 22, 2000
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