Sun Gets $75M Credit; Sees More Asset Sales
By VITA REED
Irvine-based Sun Healthcare Group Inc. is on firmer ground after inking a $75 million line of credit with CapitalSource Finance LLC of Chevy Chase, Md., and other lenders.
The struggling operator of nursing homes and other care facilities emerged from a three-year bankruptcy in 2002. It moved its headquarters to Irvine from Albuquerque, N.M., earlier this year.
Sun used the refinancing to pay off its former lenders. It plans to tap into the revolving line of credit for general corporate purposes, said Rick Matros, the company’s chief executive.
“We’re not out of the woods yet,” Matros said. “Still, (the financing) creates new options for us.”
Matros said Sun’s former lenders, which included Heller Healthcare Finance Inc. and Citicorp USA Inc., “just wanted out.”
The company’s lenders forced Sun to sell assets, “regardless of whether we wanted to sell them or not,” Matros claimed.
Sun plans to continue selling off care facilities, including a good deal of its California business.
“We at one point were the largest (nursing home) provider in California, but by the time we’re done, we will have less than 20 facilities in California from north of 70,” Matros said.
Sun is selling here for a couple of reasons.
“One-third of our business was in California, so we had too much risk sitting in one state,” Matros said. “And combined with the fact this isn’t a business-friendly state made that sort of unpalatable for us.”
Budget Cuts Hurt
The company, which had revenue of $1.9 billion in 2002, has been hit hard by cuts in Medicare and Medicaid reimbursement rates. Sun gets about half of its revenue from Medicaid with the rest coming from Medicare, private insurance or out-of-pocket payments.
Sun’s stock trades on the low-profile over-the-counter market,it once traded on the New York Stock Exchange.
Sun shares have rebounded off a low of 11 cents a share earlier this year to $7 a share at recent check.
Sun is the second OC-based operator of care facilities to get financing from CapitalSource of late.
Earlier this year, CapitalSource was part of a $150 million credit deal with Foothill Ranch-based Fountain View Inc., which has emerged from its own bankruptcy reorganization.
