MTI primed for consolidation with completion of capitalization plan

Company cuts institutional long-term debt by 75%

Seeking to maximize their tactical flexibility in anticipationof industry consolidation, MTI officials have adopted a capitalizationplan that cuts the long-term debt of the Los Angeles-based mobileimaging service provider by 75%.

The transaction included an exchange of debt for equity thatstrengthened MTI's balance sheet and positioned the privatelyheld company to pursue acquisition and merger talks with othermobile providers, according to CEO Joseph Cilurzo.

"We want to expand the business, and our debt situationwas more of a burden than we want to carry," he said.

MTI ranks as one of the nation's largest mobile providers, servingabout 300 customers in 30 states. It operates mobile CT, severalmobile lithotripsy systems, and the only mobile high-dose brachytherapyservices cleared by the Food and Drug Administration, as wellas fixed-site MRI services. Revenues in 1995 exceeded $50 million.

Participating in MTI's capitalization plan were Teachers Insuranceand Annuity Association of America and Cerberus Partners, bothin New York City; Allstate Insurance in Northbrook, IL; and SunAmerica in Los Angeles. The value of the program was not disclosed.Investors were issued warrants convertible to MTI common stockwhen the value of the shares rises to predetermined strike prices,Cilurzo said.

This was the second time in the past two years that MTI restructuredits debt. In 1994, MTI dealt out equity to its subordinated lendersto extinguish most of its long-term debt (SCAN 7/27/94).

"In that situation, there wasn't the prospect of new moneyflowing into the company," Cilurzo said. "In this restructuring,the company has the opportunity to raise equity capital as weincrease the size and profitability of the business."

Without disclosing specifics, Cilurzo noted that after severalrough quarters, MTI turned a profit in each of the last threequarters. Its cash flow is positive, and the company has a positivenet worth, he said. MTI bought six replacement high-field mobileMRI systems this year and has plans to buy several more units.

Cilurzo also purchased two mobile MRI routes this year. A SouthernCalifornia route was acquired from Diagnostic Imaging Servicesof Los Angeles, and a Northern California route was purchasedfrom its physician owner, he said.

Cilurzo considers consolidation to be a key to MTI's future.He envisions expansion either by acquiring smaller companies orthrough a merger with a similarly sized partner. Such combinationsare needed to attain the reach and geographic concentration requiredto be taken seriously in contract talks with fast-growing managed-careinsurers, Cilurzo said.

MTI has engaged in discussions covering various merger scenariosin recent months with virtually every medium and large mobileprovider in the nation, according to Cilurzo.

"MTI will definitely be a player in mobile industry consolidation,"he said. "Going on your own is not a viable strategy."