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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): June 28, 2001
Commission file number 001-12055
PARACELSUS HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3565943
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
515 W. Greens Road, Suite 500, Houston, Texas
(Address of principal executive offices)
77067 (281) 774-5100
(Zip Code) (Registrant's telephone number,
including area code)
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Items 3. Bankruptcy or Receivership.
On June 28, 2001 (the "Confirmation Date"), the United States
Bankruptcy Court for the Southern District of Texas (the "Court") entered an
order (the "Confirmation Order") confirming the first amended plan of
reorganization, as modified, of Paracelsus Healthcare Corporation ("PHC") filed
with the Court on April 18, 2001 (the "Amended Plan"). Russell Investments,
Inc., an equity security holder of PHC, has filed an appeal of the Confirmation
Order and, by way of two separate motions, has sought a stay of the Confirmation
Order pending resolution of the appeal. As of the date hereof, neither the
appeal nor the motion for the stay have been resolved.
Under the terms of the Amended Plan, the Amended Plan must be effective
no later than three months after the Confirmation Date. The consummation of the
Amended Plan is subject to a number of material conditions, and there can be no
assurance that the Amended Plan will be consummated. The following is a summary
of certain material provisions of the Amended Plan. The summary does not purport
to be complete and is qualified in its entirety by reference to all of the
provisions of the Amended Plan, which is filed as an exhibit to this document,
including all exhibits and documents described therein, as filed with the Court
and as may otherwise be amended, modified or supplemented.
Upon the effective date (the "Effective Date") of the Amended Plan, the
59,143,721 shares of PHC's common stock currently held by existing equity
holders will be canceled and rendered null and void, and current equity holders
will neither receive or retain any property under the Amended Plan on account of
such equity interests. Also upon the Effective Date, PHC will merge into a
wholly owned subsidiary incorporated in Delaware and will cease to exist as a
separate company, and the wholly owned subsidiary will emerge from bankruptcy as
reorganized PHC and will be known as Clarent Hospital Corporation. Additionally,
all principal and interest outstanding on the Notes and allowed general
unsecured claims will be exchanged for (i) 11.5% Senior Notes (due on August 15,
2005) (the "New Notes") in the aggregate principal amount of $130.0 million (ii)
a cash payment, as defined in the Amended Plan, and (iii) 100.0% of the
6,106,665 shares of new common stock to be issued by reorganized PHC under the
Amended Plan. Interest on the New Notes shall accrue commencing on the Effective
Date.
Pursuant to the terms of a settlement agreement executed in connection
with the global settlement of shareholder litigation that became effective in
September 1999, a 6.51% subordinated note (the "Park Note") and all accrued
interest thereon must convert to PHC's common stock in the event PHC files a
voluntary petition in bankruptcy. No shares of common stock have been issued to
the Park Note holder (Park Hospital GmbH or "Park") at this time. Under the
Amended Plan (i) the Park Note will be deemed to have been converted to
approximately 1.9 million shares of PHC's common stock upon the filing of the
Bankruptcy proceeding, (ii) Park will be deemed to have been issued the common
stock in accordance with the terms of the settlement and (iii) the Park Note
will be deemed to be canceled. On the Effective Date, the 1.9 million shares of
PHC common stock will be deemed canceled and rendered null and void, and Park
will neither receive nor retain any property on account of such equity
interests.
On or about the Effective Date, reorganized PHC will take the steps
necessary to cease being subject to the periodic reporting requirements of the
federal securities law. Additionally, reorganized PHC will have a limited number
of stockholders and does not plan to list the New Notes on an exchange.
Therefore, PHC will not be required to file periodic public reports, although
the new board of directors may seek to voluntarily register the Company's new
common stock with the SEC or to list the New Notes on an exchange at a future
date and thus have the Company become a publicly traded entity.
Below is a summary of "Liabilities Subject to Compromise" at May 31,
2001 as a result of PHC's Chapter 11 bankruptcy filing. Amounts reflect PHC
liabilities incurred prior to the commencement of the Chapter 11 proceeding and
do not reflect liabilities of any of PHC's subsidiaries. These liabilities,
consisting primarily of long-term debt, including the principal amounts of the
Notes and the Park Note and accrued interest through September
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15, 2000, certain accounts payable, accrued liabilities and post-termination
benefit obligations to former officers and key employees, represent PHC's
estimate of known or potential claims to be resolved in connection with the
Chapter 11 proceedings. Such claims remain subject to future adjustments based
on negotiations, actions of the Bankruptcy Court, further developments with
respect to disputed claims, determination as to the value of any collateral for
claims, treatment under the Amended Plan and other events.
LIABILITIES SUBJECT TO COMPROMISE AT MAY 31, 2001 (IN THOUSANDS):
10% Senior Subordinated Notes.......................$ 325,000
Unamortized deferred financing costs................ (5,136)
Accrued interest through
September 15, 2000................................. 36,833
6.51% Subordinated Note............................. 7,185
Post-termination benefit obligations................ 3,255
Vendor accounts payable............................. 183
Accrued litigation liabilities...................... 6,100
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Total liabilities subject to compromise $ 373,420
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For financial information regarding the assets and liabilities of PHC refer to
PHC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. PHC's
May 31, 2001 monthly financial report filed with the Court reflects historical
asset carrying values of $519.7 million, which consist primarily of investments
in subsidiaries and intercompany receivables, and liabilities of $474.6 million,
which consist primarily of the aforementioned liabilities subject to compromise
and intercompany payables. Upon emergence from the Chapter 11 proceeding, PHC
will be required to adopt "fresh start" reporting. Generally, PHC will restate
all assets and liabilities at their respective fair values based upon the terms
of the Amended Plan. PHC has not yet determined the total impact of fresh start
reporting on the historical consolidated financial statements.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 2.1 Debtor's First Amended Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Paracelsus Healthcare Corporation
(Registrant)
Dated: July 9, 2001 By: /s/ Lawrence A. Humphrey
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Lawrence A. Humphrey
Executive Vice President,
& Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
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2.1 Debtor's First Amended Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code.