"TRC Holdings, Inc. SEC Report Notes Credit Noncompliance"

“In a recent SEC filing, Total Renal Care Holdings, Inc. noted as of December 31, 1999 and March 31, 2000, the company was not in compliance with certain formula-based covenants in its credit facilities.The section on debt covenants noted that if the lenders do not waive this failure to comply, a majority could declare an event of default, which would allow lenders to accelerate payment of all amounts due under the credit facilities.Noncompliance, the report stated, also results in higher interest costs and lenders may require additional concessions from the firm prior to granting a waiver.In the event of default under the credit facilities, the report stated, the holders of convertible subordinated notes could also declare the company to be in default. The report stated the company is highly leveraged and would be unable to pay the accelerated amounts that could become immediately payable if default were declared.Due to the noncompliance, the report stated all debt outstanding under the credit facility and convertible subordinated notes as of the two dates that is potentially due within one year has been reclassified from long-term debt to a current classification. TRC’s report noted the company, under these conditions, is currently unable to draw additional amounts under the credit facilities.The company reported it is currently in discussions with lenders regarding obtaining a waiver of the violations or restructuring the credit facilities. The company reported it has, and is, taking actions to ensure its ongoing ability to cover scheduled debt service. Actions noted include divestiture of operations outside the continental U.S., curtailment of new facility acquisitions and developments, improvements in billing and cash collections processes, increased management controls over expenditures, and evaluations of alternative capital sources, in addition to pursuing debt restructuring.The report stated management believes it is unlikely an event of default will be declared due to the company’s substantial cash balance and because cash flows are expected to be sufficient to cover operating requirements and scheduled debt service through 2001.”