Coastal Physician Group has put substantially all its assets on the line to regain a financial foothold.
The Durham, N.C.-based physician management company said last week that it fully repaid $82 million in overdue bank debt thanks to new financing based on its accounts receivable. The bank debt was due Feb. 28.
Under newly completed agreements with subsidiaries of Dublin, Ohio-based National Century Financial Enterprises, Coastal will sell most of its accounts receivable-up to $151 million worth-during the next three years. Coastal will pay a program fee, similar to an interest charge, ranging from 10.97% to 12.5% per year on receivables that NCFE has purchased but not yet collected.
NCFE has also given Coastal a revolving line of credit of up to $15 million at an interest rate of prime plus 4%. The credit expires June 15, 1998, and is secured by substantially all Coastal's assets, including pledges of the common stock of each of its subsidiaries.
To close the deal, Coastal Chairman and Chief Executive Officer Steven Scott, M.D., had to invest an additional $10 million in the company.
After repaying the bank debt, the company had access to about $40 million in cash from potential additional sales of receivables and the credit line.
The financing is more expensive than traditional bank debt, but it's the best Coastal could do, said Chief Financial Officer W. Randall Dickerson.
Scott's new investment gives him a 54.6% interest in the company he founded to manage emergency physicians. Scott was ousted from his executive role last year after Coastal encountered financial problems in its efforts to enter new businesses, but he regained control of the company in a proxy fight.