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Oxford's $100M antidote
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February 11, 1998: 2:45 p.m. ET
DLJ extends mega-loan to help bolster embattled health-care firm
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NEW YORK (CNNfn) - In a move aimed at upgrading its teetering health-maintenance-organization operations while it seeks longer-term financial stability, Oxford Health Plans Inc. has obtained a $100 million loan from a unit of Donaldson, Lufkin & Jenrette Securities Corp.
In a filing with the Securities and Exchange Commission late Tuesday, Oxford (OXHP) said the loan would be used to shore up its finances as it tries to surmount a financial predicament involving delayed payments on a rash of medical claims.
Oxford shares showed little reaction, edging up 1/8 to 20-3/16 in midday trading on the Nasdaq.
Last October, Oxford's problems erupted in public when the company disclosed that an upgrade of company computers had delayed the billing of scores of medical claims.
The computer snafu quickly mushroomed into a full-scale legal dilemma, when 5,000 doctors filed legal claims seeking $140 million in back fees they contended Oxford owed them. Oxford countered by denouncing the claims as a "substantial overstatement" of the actual amounts owed.
In January William Sullivan, Oxford's chief executive officer, announced plans to resign, creating a leadership vacuum that has further exacerbated Oxford's woes.
But the financial problems remain central, with the company having reported a $78.2 million loss in the third quarter - its first earnings downturn since going public in 1991. Oxford has since said it anticipates ending up $120 million - or $1.50 a share - in the red in the fourth quarter.
Under its Tuesday filing with the SEC, Oxford left open the possibility of borrowing another $100 million from DLJ should a perceived need arise.
Against this backdrop, a spate of investors have eyed the Norwalk-Conn.-based health-maintenance organization in recent months.
Last week, Franklin Mutual Advisers Inc., which is managed by shareholder activist Michael Price, notified the Securities & Exchange Commission that it had purchased 4.44 million shares, or 5.5 percent of Oxford.
In addition, two buyout firms, Texas Pacific Group and Kohlberg Kravis Roberts & Co., are said to be considering a joint investment in Oxford, according to an unsourced report in the Wall Street Journal Interactive Edition Wednesday.
While noting that no deal was imminent, the Journal cited insider speculation that Oxford was seeking a financing package ranging from $200 million to $500 million in the form of equity, debt or a possible convertible stock offering.
Oxford's current adversity comes in the wake of a two-year run of stunning successes, during which its membership mushroomed from 392,000 to 1.3 million.
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