Filed by CII Financial, Inc. Pursuant to Rule 425 under the Securities Act of 1933 For: CII Financial, Inc. Commission file No.: 333-52726 CII FINANCIAL, INC. California Indemnity Insurance Company Commercial Casualty Insurance Company subsidiaries of Sierra Health Services, Inc. P.O.Box 15645, Las Vegas, Nevada 89114-5645 PRESS RELEASE FOR IMMEDIATE RELEASE - --------------------- CONTACTS: John Okita Andrew C. Karp Chief Financial Officer Managing Director (702) 242-7531 Banc of America Securities LLC High Yield Special Products (704) 388-4813 or (888) 292-0070 CII FINANCIAL ANNOUNCES STATUS OF OFFER FOR CONVERTIBLE SUBORDINATED DEBENTURES Las Vegas, May 1, 2001 - CII Financial, Inc. today announced that there will be no further changes to the terms of its pending tender and exchange offer for its $47 million of outstanding 7 1/2% convertible subordinated debentures due September 15, 2001 (CUSIP No. 12551LAB7). The Company said that, in order to allow for the final tabulation of the results of the offer, the expiration date for the offer is being extended from 11:59 p.m., New York City time, on Tuesday, May 1, 2001, to 12:00 noon, New York City time, on Wednesday, May 2, 2001. The offer is conditioned on receipt of valid tenders from holders of at least 90% (or $42.35 million) of the aggregate outstanding principal amount of the old 7 1/2% subordinated debentures. Under the offer, holders can choose to tender their old 7 1/2% subordinated debentures for either cash or new 9 1/2% senior debentures. The Company said that, as of 11:59 p.m., New York City time, on April 30, 2001, it had not received tenders of a sufficient number of old 7 1/2% subordinated debentures to enable the offer to be consummated. Specifically, the Company said it had received tenders of $37,336,000 in aggregate principal amount of old 7 1/2% subordinated debentures, representing approximately 79% of the outstanding principal amount of the old debentures. Of such tendered debentures, the Company said $31,134,000 in aggregate principal amount has been tendered for cash and $6,202,000 in aggregate principal amount has been tendered for new 9 1/2% senior debentures. --more-- CII - Status of Offer for Convertible Subordinated Debentures p. 2/2/2/2/2 As previously announced on April 19, 2001, the Company said the final terms of the offer consist of the following: - - The cash purchase price for tendered debentures is $739.12 per $1,000 principal amount, plus accrued interest. The cash offer is for up to a total of $27,059,000 principal amount of old 7 1/2% subordinated debentures. - - The Company is offering to exchange the remaining $20,000,000 principal amount of old 7 1/2% subordinated debentures for new 9 1/2% senior debentures. - - The maturity of the new 9 1/2% senior debentures is September 15, 2004. - - The covenants applicable to the new debentures include limitations on indebtedness, liens, restricted payments, sales of capital stock of subsidiaries and transactions with affiliates. The covenants also include an excess cash flow offer, asset sale offer and change of control offer. - - In the event of a change of control of CII Financial, holders of the new 9 1/2% senior debentures will have the right to require the Company to repurchase their new debentures at 100% of the principal amount, plus a specified premium declining over time. The repurchase premium will initially be 10%. As previously announced, if holders of more than $27,059,000 total principal amount of old 7 1/2% subordinated debentures elect to tender their debentures for cash, the Company will purchase a total of $27,059,000 principal amount of old 7 1/2% subordinated debentures for cash and the Company will exchange the balance of the tendered debentures for new 9 1/2% senior debentures. All holders who elect to receive cash will be treated equally in this process. It is a condition of the offer that at least $27,059,000 principal amount of old 7 1/2% subordinated debentures will be tendered for cash. Holders who elect new 9 1/2% senior debentures will receive $1,000 principal amount of new 9 1/2% senior debentures for each $1,000 principal amount of their old 7 1/2% subordinated debentures, plus accrued and unpaid interest in cash. It is a condition of the offer that the Company will exchange no more than $20,000,000 total principal amount of old 7 1/2% subordinated debentures for new 9 1/2% senior debentures. Banc of America Securities LLC is the exclusive dealer manager for the offer. D.F. King &Co., Inc. is the information agent and Wells Fargo Corporate Trust is the depositary. Copies of the Preliminary Prospectus and Exchange Offer may be obtained by calling D.F. King at (800) 735-3591. Additional information concerning the terms and conditions of the offer may be obtained by contacting Banc of America Securities LLC at (888) 292-0070. ---more--- CII - Status of Offer for Convertible Subordinated Debentures p. 3/3/3/3/3 CII Financial is a holding company primarily engaged in writing workers' compensation insurance in nine western and mid-western states through its wholly owned subsidiaries, California Indemnity Insurance Company, Commercial Casualty Insurance Company, Sierra Insurance Company of Texas and CII Insurance Company. CII Financial is a wholly owned subsidiary of Sierra Health Services, Inc. (NYSE:SIE), a diversified health care services company based in Las Vegas. Statements in this news release that are not historical facts are forward-looking and based on management's projections, assumptions and estimates; actual results may vary materially. Forward-looking statements are subject to certain risks and uncertainties, some of which may be found in the Preliminary Prospectus and Exchange Offer and other documents filed with the Securities and Exchange Commission and which are incorporated herein by reference. Additional Information and Where to Find It: CII Financial, Inc. has filed a Registration Statement with the Securities and Exchange Commission on Form S-4 registering the new debentures to be issued in the exchange offer. The Registration Statement and the preliminary prospectus contained therein contain important information about CII Financial, the exchange offer and related matters. Security holders are urged to read the Registration Statement and the preliminary prospectus contained therein, CII Financial's Schedule TO and any other relevant documents filed by CII Financial with the SEC. The Registration Statement has not yet become effective. The new debentures may not be sold and, although you may tender your old debentures, tenders may not be accepted prior to the time the Registration Statement becomes effective. This shall not constitute an offer to sell or an offer to buy nor shall there be any sale of the new debentures in any State in which such offer, solicitation or sale would be unlawful. Security holders are able to obtain copies of the Registration Statement on Form S-4 and the preliminary prospectus, CII Financial's Schedule TO and any other relevant documents for free through the Web site maintained by the SEC at http://www.sec.gov. In addition, these documents are available free of charge by contacting the Information Agent for the offer, D.F. King & Co., at (800) 735-3591. If you have any questions about the offer, please call the Dealer Manager for the offer, Banc of America Securities LLC, at (888) 292-0070. # # #
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Filed: 1 May 01, 12:00am