Molina Healthcare touts good liquidity despite operations disruption

By Devika Patel

Knoxville, Tenn., May 1 – Molina Healthcare, Inc. has a strong liquidity position despite disruption to its managed-care operations, with $840 million of cash on the balance sheet and $900 million of available capacity under a revolver and short-term facility.

The company may turn to the high-yield debt markets if management wants to make its financings permanent.

“We would characterize our first-quarter results as more than respectable in the context of unprecedented disruption to the entire spectrum of traditional managed-care operations that occurred over a span of just a few weeks,” president and chief executive officer Joseph M. Zubretsky said on the company’s first quarter ended March 31 earnings conference call on Friday.

“In this difficult operating environment, it should be noted that our financial position is strong, as we had already done the hard work to develop very solid capital and liquidity positions.

“We drew down $380 million in remaining capacity of our term loan facility to bolster our liquidity.

“We availed ourselves of this inexpensive debt instrument, which would have otherwise expired in the coming quarter and after the completion of the term loan facility draw, we are holding approximately $840 million in excess parent company cash,” he said.

As of the end of the quarter, the company had about $900 million of untapped capacity under its bank facilities, and management believes it could tap the high-yield debt market if it chooses.

“We have a $500 million untapped revolver and we topped up that revolver with a short-term facility of an additional $400 million.

“Our high-yield debt is trading really low right now, and we believe we have really good access to the high-yield market if we wanted to make any of this financing permanent,” he said.

Long Beach, Calif.-based Molina provides managed health-care services under the Medicaid and Medicare programs and through state insurance marketplaces.

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