PacifiCare Health Systems to redeem 10¾% notes with stock-sale proceeds

New York, Nov. 11 - PacifiCare Health Systems, Inc. (B2) said it plans to sell 3.8 million shares of its common stock in a public offering under a shelf registration statement previously filed and declared effective by the Securities and Exchange Commission, and said it would use the proceeds from the offering of approximately $200 million after underwriting fees to redeem $175 million in principal of its outstanding 10¾% senior notes that mature June 1, 2009, under terms of their equity clawback provision.

PacifiCare, a Cypress, Calif.-based provider of a variety of consumer-driven health care

and life insurance products, issued $500 million of the 10¾% notes in May 2002; under a provision in the notes' indenture, the company can redeem up to 35% of the outstanding bonds ($175 million out of $500 million) using equity sale proceeds in the first three years after the bonds' issue (they are otherwise not redeemable at this time).

In addition to the redemption of the $175 million face amount of the bonds, PacifiCare will also pay accrued interest expense, the redemption premium and other fees and expenses associated with the transaction, in accordance with the bond indenture.

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