AHP Considers Buyout Bid

Dallas

American HomePatient has announced it is considering an acquisition by Highland Capital Management or another party.

The Brentwood, Tenn.-based provider has scheduled its annual stockholders meeting, which could bring about major changes for the company, for June 7.

Dallas-based Highland, one of AHP’s major shareholders, announced in February it wants to buy the provider, citing increasing disappointment with AHP’s performance.

“We believe that our proposal provides an outstanding opportunity for your stockholders to maximize the value of their investment in AHP,” Highland executive Patrick H. Daugherty said.

Highland owns 9.9 percent of AHP’s stock and $204 million of the company’s secured debt.

Based in Brentwood, Tenn., AHP operates approximately 280 locations in 35 states providing respiratory services, infusion therapy and other HME. The company filed for Chapter 11 bankruptcy in 2002 but emerged in July 2003, implementing initiatives to improve productivity and reduce personnel costs in operating and billing centers.

But in its letter, Highland noted the company’s over-leveraged balance sheet, a challenging Medicare reimbursement environment and the near-term maturity of AHP’s secured debt. The company’s outstanding $250 million promissory note will be payable Aug. 1, 2009.

“We do not expect that AHP’s prospects will improve under the direction of current management such that repayment of the note will be possible,” the letter stated. If AHP is unable to simplify its capital structure prior to its looming debt maturity, Highland said, “AHP may have no other option than to file for bankruptcy a subsequent time.”

The provider recently reported a 79 percent drop in net income for the fourth quarter — $1.7 million in 2005 compared to $8.2 million for the same period in 2004. For the year ended Dec. 31, AHP reported net income of $7.7 million, down 42 percent from $13.2 million in 2004. Revenues for the year were $328.4 million, down $7.4 million from the previous year.