Millennium Health LLC’s $1.8 billion loan tumbled to just over half of face value as investor concern grows that the company’s cash will be squeezed by a government settlement of a billing dispute.
Millennium, which sells urine-testing services to monitor prescription drug use and potential abuse, disclosed to some of its lenders that a draft agreement to settle with regulators and the U.S. Justice Department calls for it to pay $250 million, said two people with knowledge of the matter, who asked not to be identified because they weren’t authorized to speak publicly.
The market value of the loan fell 0.2 cent on the dollar to 51.9 cents on Tuesday, extending losses in six of the last seven weeks that brought the debt down from above face value, according to quotes compiled by Bloomberg.
The company faces the fine after a 31 percent decline in one measure of its first-quarter earnings, the people said.
Millennium, owned by its management team and private-equity firm TA Associates Management, has told investors it’s engaged in a dispute with the Centers for Medicare & Medicaid Services over alleged improper billing of the government health-care agency for approximately 60 deceased people and unauthorized documentation in other cases, the people with knowledge of the disclosures said. The agency had threatened to revoke its ability to bill CMS, the people said.
“Millennium Health is very pleased to have reached an agreement in principle to resolve all federal and state issues involving the company,” Nicole Beckstrand, a spokeswoman for San Diego-based Millennium, said by telephone. “While the details are not finalized, this allows Millennium Health to move forward as part of the federal health-care program.”
Beckstrand declined to comment further. Marcia O’Carroll, a spokeswoman at TA Associates, declined to comment. A representative for CMS declined to comment, saying that negotiations with Millennium are “fluid” and confidential.
The Wall Street Journal reported the size of the preliminary settlement on Sunday.
The labs tester limits access to its financial performance information, restricting data to current and approved prospective lenders, the people said.
First-quarter earnings before interest, taxes, depreciation and amortization declined to $68 million from $98.4 million in the year-earlier period, said two of the people. For the 12 months through March 31, Ebitda decreased to about $358 million, compared with $387.5 million for the 2014 calendar year, the people said.
Revenue dropped by less than $15 million to about $665 million, the people said.
Millennium’s cash balance was $69.4 million on March 31, said one of the people. It had been $67.4 million at the end of 2014, said two of the people.
The company’s $50 million revolving loan due April 2019 had no borrowings as of March 31, said one of the people.
The $1.78 billion term loan B due April 2021, issued when the company was known as Millennium Labs, had begun last week quoted at 72.4 cents on the dollar, according to data compiled by Bloomberg. Only six term loans of $500 million or more that are tracked by Bloomberg trade at less than 55 cents on the dollar. These include obligations of Sabine Oil & Gas Corp. and Walter Energy Inc., both of which have missed debt payments.