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Alliance Imaging Misses $1-Million Loan Payment : Medical services: The Orange-based provider of MRIs is negotiating with lenders to ease its debt burden. Such problems are industry-wide.

October 11, 1994|JAMES S. GRANELLI | TIMES STAFF WRITER

ORANGE — Alliance Imaging Inc., operating in a lackluster medical imaging services industry, said Monday that it has missed a $1-million principal payment on a loan but continues to negotiate with lenders to ease its high-interest debt burden.

The provider of magnetic resonance imaging, or MRI, said that it did make its interest payment Sept. 30 on senior notes held by Cigna Corp. and that the insurance company gave Alliance until Nov. 4 to pay the principal and clear up other technical defaults.

"We could have paid the principal, though it would have depleted us to a point that I think would have been imprudent to do business," said Terrence M. White, Alliance's chief financial officer.

Alliance is negotiating with Cigna and four other insurance companies holding another series of notes to lower the 12.5% interest rate on the notes, to convert some of the debt to common stock and to extend the payment period. White said the lenders have agreed to do all three, but how far they will go in easing the burden is the subject of negotiations.

He said the Nov. 4 deadline for the missed principal payment could be extended if the talks show "substantive progress."

In the past three months, White said, the company has found it more difficult to obtain equipment financing, so it has had to use its $6 million in cash on hand to buy equipment outright or to make a higher down payment to finance capital expenditures.

Alliance is weighed down with $63 million in debt from a 1988 leveraged buy-out and stuck in an industry that is foundering. The prospect of health care reform has caused doctors to rely less on MRI machines. At the same time, an oversupply of machines has lowered the cost of the equipment and the pictures they produce.

Analysts are no more worried about Alliance than they are about others in the industry.

"It's not like things are going downhill at the company," said analyst Mark Matheson at the brokerage Crowell, Weedon & Co. in Los Angeles. "The technology is still state of the art. The tough thing is that the price per scan has been dropping from a range of $600 to $900 to a range of $300 to $600."

Alliance lost $14.7 million last year on revenue of $60.7 million. For the first six months this year, it lost $2.1 million on revenue of $28.7 million. White said third-quarter results, to be released later this month, will likely show a loss.

Alliance Imaging at a Glance

* Founded: 1983

* Business: Magnetic resonance imaging services

* Headquarters: Orange

* Chairman and CEO: Richard N. Zehner

* Employees: 300

* 1993 results: $14.7 million loss on revenue of $60.7 million

Source: Alliance Imaging Inc.

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