Interest rate changed; Covenants reset for 2008 and 2009
TUCSON, Ariz., March 11 /PRNewswire-FirstCall/ -- The Providence Service Corporation (Nasdaq: PRSC) today announced it has signed an amended credit agreement with its senior debt holders related to its $173 million senior term loan. The agreement is designed to reset covenant targets for the fourth quarter of 2008 and for 2009.
The amendment provides for a number of covenant calculation adjustments that reflect certain changes and/or events since 2007 that have impacted or may impact the Company's business, including the instability with state payers, the final outcome of a contract arbitration in Canada, costs forecasted to be incurred in connection with a proxy election contest that the Company expects to be brought by a dissident stockholder group, acquisition costs, stock compensation and fees related to the potential sale of assets. In connection with the amendment, the Company will incur certain costs and expenses, including but not limited to, an amendment fee payable to the lenders, and an increase in the LIBOR interest rate spread from 350 basis points to 650 basis points.
"We are fortunate to have a syndicate that remains supportive of the Company and is willing to work with us in our changing business environment, including the economic meltdown that impacted our business over the summer and fall of 2008," said Fletcher McCusker, Chairman and CEO. "Within the difficult lending market we are currently experiencing, this new agreement is a fair deal for both the Company and its lenders. We are grateful to CIT Capital Securities who served as lead bank in negotiating these new terms."
The decision was made to amend the credit agreement, rather than just negotiate a covenant default waiver for the fourth quarter of 2008, in an effort to facilitate a full year of anticipated covenant coverage without regard to any potential debt payments related to the possible sale of assets. Providence was represented by Skadden, Arps, Slate, Meagher & Flom LLP as special credit counsel.
The summary of certain terms of the Amendment in this press release is a summary of the final Amendment and is qualified by reference to the full text of the Amendment which the Company intends to file promptly with the Securities and Exchange Commission.
Providence Service Corporation, through its owned and managed entities, provides home and community based social services and non-emergency transportation services management to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections. Providence does not own or operate beds, treatment facilities, hospitals or group homes, preferring to provide services in the client's own home or other community setting. The Company provides a range of services through its direct and managed entities to over 74,000 clients through 870 contracts at September 30, 2008, with an estimated six million individuals eligible to receive the Company's non-emergency transportation services related to its LogistiCare operations. Combined, the Company has a nearly $1 billion book of business including managed entities.
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "demonstrate," "expect," "estimate," "anticipate," "should" and "likely" and similar expressions identify forward-looking statements. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to the global credit crisis, capital market conditions, and other risks detailed in Providence's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2007. Providence is under no obligation to (and expressly disclaims any such obligation to) update any of the information in this press release if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise.
|SOURCE Providence Service Corporation|
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