Nu-Med avoided default on $102 million of debentures by meeting a deadline to pay $7.8 million of interest on the debt, the company has announced.
The Encino health-care concern announced last month that it had missed the payment's due date of Sept. 15. But at that time, the company said it expected to make the payment before Oct. 14, when it would have been in default.
Nu-Med had issued sinking-fund debentures, which require the issuer to regularly set aside money to repay part of the debt each year, just as a homeowner pays off part of the principal on a mortgage each year.
In a brief statement, Nu-Med said the payment was made in time. But the company remained quiet on why the payment was missed initially, and Nu-Med President William Hartauer declined to elaborate, saying, "The press release stands for itself."
Shortly after Nu-Med missed the payment, its stock dropped to a 52-week low of $3.50 per share in over-the-counter trading. The stock also closed Monday at $3.50.
Although profitable, Nu-Med is operating under a heavy debt load. The two debentures involved with the late interest payments represent about one-third of Nu-Med's $315 million in total long-term debt, which is six times larger than its $51 million of stockholders' equity.
In an effort to ease its debt costs, Nu-Med has been negotiating with banks and other lenders on a plan to refinance its $74 million of bank debt. The debt currently carries variable interest rates, and Nu-Med is trying to replace it with fixed-rate financing.
Nu-Med has said only that it planned to pay the interest due on the debentures as part of the bank-debt refinancing. The company has not said whether it missed the interest payment because it lacked the money or because it wanted to delay the payment pending the outcome of the bank-debt talks.
In its announcement last week, Nu-Med said that the talks were continuing and that the refinancing was expected to be completed later this month.
Nu-Med operates nearly 50 health-care facilities nationwide, including acute-care hospitals, medical offices, psychiatric hospitals and a drug-treatment center. In its fiscal year ended April 30, Nu-Med earned $4.4 million on revenue of $392 million.