First Physicians Capital Group Announces Progress on Key Fiscal 2010 Strategic Growth Initiatives & Non-Binding Letter of Intent
22 May 2010 - 3:51AM
Business Wire
First Physicians Capital Group, Inc. (“FPCG” or the “Company”)
(OTCBB: FPCG), an operator of healthcare services firms primarily
in rural and suburban markets in the U.S., announced the initiation
of several key strategic initiatives and transactions as part of
its Fiscal 2010 growth plans. These initiatives include:
- Proceeding with plans to split
FPCG into separate real estate and healthcare services business
lines;
- Entering into a non-binding
Letter of Intent to acquire a leading physician-owned group and
operator of hospitals, surgery centers, physical therapy clinics
and imaging centers in the U.S. Midwest. The target company
generates over $100 million in net revenue on an annual basis. The
closing of the transaction is subject to due diligence, completion
of definitive agreements, financing, and regulatory approvals;
- Selling or leasing out non-core
and non-strategic facilities within our portfolio of healthcare
assets;
- Retaining the services of
investment banking advisors to assist with structuring and
financing our go forward plan with support from existing investors;
and,
- Successfully extending existing
convertible bridge loan maturities by 18-36 months and reducing
interest rates from 16% to 10% per annum. FPCG has now reduced
short-term debt from $4.4 million as of December 31, 2009 to zero
and repositioned all of FPCG bank and investor debt as long-term
debt, creating opportunities to more efficiently provide working
capital for growth.
First Physicians Realty Group (FPRG)
FPRG is a wholly-owned subsidiary of FPCG formed to hold and
manage the Company’s portfolio of existing and future real estate
assets. Upon completion of the initiatives outlined above, the
Company’s healthcare services operations will essentially be
debt-free and will have entered into long-term, market-rate leases
with FPRG and its capital partners.
Recent highlights and future plans for FPRG include:
- In January 2010, FPRG completed
its first sale-leaseback transaction with FPCG’s Southern Plains
Medical Center (SPMC) clinic. The financing for the sale-leaseback
transaction was arranged by FPRG in partnership with local Oklahoma
City-based capital providers. This transaction resulted in a $4.7
million recapitalization of SPMC and provides the foundation and a
template for similar transactions going forward.
- FPRG is in the process of
completing a sale-leaseback transaction involving FPCG’s three
critical access hospitals in Oklahoma. As currently contemplated,
FPRG shall acquire the three properties from FPCG’s Southern Plains
Medical Group (SPMG) subsidiary, assume existing mortgage debt
related to the properties, and lease the facilities back to SPMG.
FPRG is working with local partners to sell a partial equity
interest in these properties.
- Once the above transaction is
completed, FPRG’s real estate portfolio is expected to generate
approximately $2 million in annual rents. FPRG will carry
approximately $13 million in related mortgage debt under the USDA
loan guaranty program.
- FPRG will seek similar
properties to add to its growing portfolio of healthcare-related
real estate assets.
Strategic Acquisition
The Company has entered into a non-binding Letter of Intent to
acquire a leading healthcare services provider in the Midwestern
U.S. market. Key aspects of the transaction include:
- No change of control expected
for FPCG;
- Offer consideration to the
target includes a combination of cash and securities;
- FPCG expects expanding its Board
of Directors to include members of the target company;
- The transaction shall require
bank debt, investor debt, or equity financing, or a combination
thereof; and,
- The transaction is subject to
the satisfactory completion of mutual due diligence, definitive
agreements, financing, and regulatory and third-party approvals,
including approvals from selling shareholders.
There is no assurance or guarantee that the transaction will
close. While we face a challenging environment given recent changes
to healthcare laws, anticipated changes in the U.S. tax code, and
volatility in the capital markets, both sides are working
diligently toward a targeted closing of the transaction in the
third calendar quarter of 2010.
The transaction is estimated to be valued at over $100 million
in enterprise value on the target company. If completed, the
financial impact of the transaction would be significant for FPCG.
Based on audited financial results for the year ending December 31,
2009, the combined company would have generated over
$145 million in net revenue and positive EBITDA. The
transaction would add significantly to the Company’s real estate
holdings as well as add over 50 new physician partners to the
Company.
Investment Banking Relationships
Given the complexity and size of the transaction outlined above,
FPCG has decided to retain the services of investment banking
advisors with particular expertise in healthcare services and
financings to assist us with structuring and financing our go
forward plan. They will also assist management with transaction due
diligence and processing.
About First Physicians Capital Group, Inc.
First Physicians Capital Group, Inc. provides financial and
managerial services to physicians, physician groups, and healthcare
delivery centers in rural and suburban markets in the U.S. The
Company is building a portfolio of interests in healthcare services
operations outside the traditional urban hospital setting. FPCG
promotes quality medical care by offering improved access and
breadth of services. It unlocks the value of its investments by
developing strong, long-term and mutually beneficial relationships
with their physicians and the communities they serve. For more
information, please visit
http://www.firstphysicianscapitalgroup.com.
Safe-Harbor Statement under the Private Securities Litigation
Reform Act of 1995: This press release may contain forward-looking
information within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), including
all statements that are not statements of historical fact regarding
the intent, belief or current expectations of the Company, its
directors or its officers with respect to, among other things: (i)
the Company’s financing plans; (ii) trends affecting the Company’s
financial condition or results of operations; (iii) the Company’s
growth strategy and operating strategy; and (iv) the declaration
and payment of dividends. The words “may,” “would,” “will,”
“expect,” “estimate,” “anticipate,” “believe,” “intend” and similar
expressions and variations thereof are intended to identify
forward-looking statements. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance
and involve risks and uncertainties, many of which are beyond the
Company’s ability to control, and that actual results may differ
materially from those projected in the forward-looking statements
as a result of various factors including the risks disclosed in the
Company’s Forms 10-K and 10-Q filed with the Securities Exchange
Commission.
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