Firm's interest intensifies

BRENTWOOD, Tenn. - Dallas-based Highland Capital Management and a partner became American HomePatient's largest shareholder in early April, fueling talk that big changes are in store for the struggling national provider. The Bermuda-based Highland Crusader Offshore Partners now owns 48% of AHP's stock, according to an April 9 Securities and Exchange Commission (SEC) filing. Crusader owns the stock (it bought about 8.4 million shares for $24.2 million), but Highland, as Crusader's investment advisor, "exercises all voting and dispositive powers." Also named in the filing: Strand Advisors and James Dondero, Strand's president. "That is a lot of stock to accumulate without plans to do something," said Balaji Gandhi, an analyst with the New York-based investment firm Oppenheimer & Co. One industry watcher said he wouldn't be surprised if Highland seeks to shake up AHP's board of directors and replace some of the company's current management. "(Highland) has a controlling interest now, and I'm sure they'll quickly exercise some of their rights," said consultant Schuyler Hoss, president of Northwest Healthcare Management in Vancouver, Wash. "Basically, the game is over. (Highland) has won." In 2006, Highland Capital threatened to buy AHP and seek representation on its board of directors. At the time, it owned 10% of the company's stock and 80% of its secured debt. Ultimately, Highland retreated, possibly due to neb-med reimbursement cuts (See HME News August 2006). Highland Capital may now seek to buy all outstanding shares of the company, said industry watchers. It could then take the company private, grow it and, in a few years, take it public again. It could also put AHP up for sale. Additionally, there's always the possibility of an AHP-Rotech merger, said industry watchers. Last year, Highland Financial Corp. secured a $25 million line of credit for Rotech (See HME News November 2006). "The move that everyone's now waiting for is Highland stating what they're going to do now," Hoss said.