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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 15, 2000
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Commission file number 001-12055
PARACELSUS HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3565943
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
515 W. Greens Road, Suite 500, Houston, Texas
(Address of principal executive offices)
77067 (281) 774-5100
(Zip Code) (Registrant's telephone number,
including area code)
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Items 1-2. Not Applicable.
Item 3. Bankruptcy or Receivership.
On September 15, 2000, Paracelsus Healthcare Corporation filed a
voluntary petition under Chapter 11 of the United States Bankruptcy Code with
the United States Bankruptcy Court for the Southern District of Texas (the
"Court") (case no. 00-38590-H2-11). The bankruptcy filing, which is limited to
the parent company ("PHC"), and does not include any of PHC's hospital
subsidiaries, has been assigned to Bankruptcy Judge Karen K. Brown.
Simultaneously with the commencement of its bankruptcy case, PHC filed a Plan of
Reorganization (the "Plan") pursuant to which PHC proposes to effect its capital
restructuring. PHC elected to seek Court protection in order to facilitate the
restructuring of its debt while continuing to maintain normal business
operations in PHC's hospital subsidiaries. PHC took this step with the support
of the holders of at least two-thirds of the principal amount of PHC's $325.0
million 10% Senior Subordinated Notes (the "Notes"). PHC anticipates that the
current directors and officers will continue in place subject to supervision by
the Court.
PHC's hospital subsidiaries have not filed for bankruptcy protection
and are expected to continue paying, in the ordinary and normal course of
business, all wages, benefits and other employee obligations, as well as all
outstanding and ongoing accounts payable to their contractors and vendors. A
recently completed $62 million credit facility, secured at the subsidiary level,
will not be directly affected by PHC's filing and, combined with cash on hand,
is expected to be sufficient to meet the working capital and capital expenditure
needs of the hospital subsidiaries during the restructuring process. The
hospitals remain open and will continue providing health care services to their
patients.
PHC's decision to restructure its debt was due to its highly leveraged
capital structure. Despite positive earnings before interest, taxes,
depreciation, amortization and unusual charges from hospital operations, the
high interest burden has severely impacted PHC's reinvestment opportunities. In
an effort to conserve capital and to preserve the normal operations of the
hospital subsidiaries, PHC did not make its interest payments on the Notes due
February 15 and August 15, 2000.
PHC has been in negotiations with the Note holders. Holders of at least
two-thirds of the principal amount of the Notes support the principal financial
terms of the Plan and, subject to certain conditions, have indicated an intent
to vote in favor of the Plan. On the effective date of the Plan (the "Effective
Date"), all principal and interest outstanding on the Notes will be exchanged
for (i) the reorganized PHC 11.5% Senior Notes (due on August 15, 2005) in the
aggregate principal amount of $130.0 million (the "New Notes"), and (ii) 95.0%
of the reorganized PHC common stock, subject to dilution through the exercise of
the Series A Warrants and Series B Warrants (as referred to below). Interest on
the New Notes shall accrue commencing on August 15, 2000. The Plan also provides
for the holders of PHC's common stock as of the Record Date (as defined in the
Plan) to (i) receive 5.0% of the reorganized PHC's common stock, (ii) receive
warrants (the "Series A Warrants") to purchase prior to the fifth anniversary of
the Effective Date an additional 9.64% of the reorganized PHC common stock
(exercisable at $320.0 million enterprise value of the reorganized PHC), and
(iii) receive warrants (the "Series B Warrants") to purchase prior to the first
anniversary of the Effective Date an additional 2.0% of the reorganized PHC
common stock (exercisable at $100.0 million value of the reorganized PHC common
stock). The Plan would make its effectiveness subject to certain conditions,
such as limiting the amount of allowed and undisputed unsecured claims other
than the Notes to $15.0 million. The Plan, as well as PHC's Disclosure
Statement, are on file with the Court and are available for review and copying
during the Court's normal business hours.
A copy of the press release issued by the Company is included as an
exhibit to this filing and is incorporated herein by reference.
Certain statements contained herein are "forward-looking statements"
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve a number of risks and
uncertainties. All statements regarding the Company's expected future financial
position, results of operations, cash flows, liquidity, financing plans,
business strategy, budgets, projected costs and capital expenditures,
competitive position, growth opportunities, plans and objectives of management
for future operations and words such as "anticipate," "believe," "plan,"
"estimate," "expect," "intend," "may" and other similar expressions are
forward-looking statements. Such forward-looking statements are inherently
uncertain, and stockholders must recognize that actual results may differ
materially from the Company's expectations as a result of a variety of factors,
including, without limitation, those discussed below.
Factors which may cause the Company's actual results in future periods
to differ materially from forecast results include, but are not limited to: i)
Competition and general economic, demographic and business conditions, both
nationally and in the regions in which the Company operates; ii) Existing
government regulations and changes in legislative proposals for healthcare
reform, including changes in Medicare and Medicaid reimbursement levels; iii)
The ability to enter into managed care provider arrangements on acceptable
terms; iv) Liabilities and other claims asserted against the Company; v) The
loss of any significant customer, including but not limited to managed care
contracts; vi) The ability to attract and retain qualified personnel, including
physicians and vii) Uncertainties associated with the outcomes of PHC's
bankruptcy proceedings.
The Company is generally not required to, and does not undertake to,
update or revise its forward-looking statements.
Items 4-6. Not Applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
Exhibit 99.1 Press Release dated September 15, 2000.
Items 8-9. Not Applicable.
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.
Paracelsus Healthcare Corporation
(Registrant)
Dated: September 19, 2000 By: /S/ LAWRENCE A. HUMPHREY
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Lawrence A. Humphrey
Executive Vice President,
& Chief Financial Officer
