Prospect Medical Holdings, Los Angeles, said that some of its lenders have delivered a default notice related to a divestiture that the company decided not to pursue as the credit markets deteriorated last year. The company, which owns two hospitals with four campuses in Southern California and operates a provider network of 14,000 primary-care and specialist physicians, is seeking to refinance its $155 million credit agreement from 2007, under which the company owes $139 million, Prospect said.
The companys credit agreement, as amended in May 2008, required certain divestitures, one of which was carried out last year, Prospect said. The second divestiture, however, was scuttled because the offers for this unnamed business were low ball and its operations have turned around dramatically in the meantime, said Sam Lee, chairman and CEO of Prospect. Lee, during a brief conference call to discuss the matter, said that Prospect has told the lenders that it would be detrimental to them and the company to pursue this divestiture in the current climate.
Moreover, Lee said, Prospect has made all interest and principal payments in full and on time. Most of the debt is held by hedge funds, Lee said, adding that investors could speculate as to their motives in pursuing the default.