CII Financial Announces Final Terms of Exchange Offer for Convertible Subordinated Debentures and Extension of Expiration Date; Payment of March 15 Interest Payment

Apr 19, 2001, 01:00 ET from CII Financial, Inc.

    LAS VEGAS, April 19 /PRNewswire/ -- CII Financial, Inc. today announced
 the amendment of its pending exchange offer for all $47 million of its
 outstanding 7 1/2% convertible subordinated debentures due September 15, 2001
 (CUSIP No. 12551LAB7).  Under the offer, as amended, holders can choose to
 exchange their old 7 1/2% junior subordinated debentures for either new senior
 debentures or cash.
     The Company said the final terms of the offer consist of the following:
 
     --  The cash purchase price has been increased from $700 per $1,000
         principal amount to $739.12 per $1,000 principal amount, plus accrued
         interest.  The cash offer is for up to a total of $27,059,000
         principal amount of old 7 1/2% subordinated debentures.
 
     --  The Company is offering to exchange the remaining $20,000,000
         principal amount of old 7 1/2% subordinated debentures for new 9 1/2%
         senior debentures.
 
     --  The maturity of the new senior debentures has been shortened from
         March 31, 2005 to September 15, 2004.
 
     --  The covenants applicable to the new debentures have been expanded to
         include limitations on indebtedness, liens, restricted payments, sales
         of capital stock of subsidiaries and transactions with affiliates.
         The covenants also include an excess cash flow offer, asset sale offer
         and change of control offer.
 
     --  In the event of a change of control of CII Financial, holders of the
         new 9 1/2% senior debentures will have the right to require the
         Company to repurchase their new debentures at 100% of the principal
         amount, plus a specified premium declining over time.  The repurchase
         premium will initially be 10%.
 
     Under the amended offer, holders who elect cash will receive $739.12 in
 cash for each $1,000 principal amount of their old 7 1/2% subordinated
 debentures accepted under the cash option, plus accrued and unpaid interest in
 cash.  If holders of more than $27,059,000 total principal amount of old
 7 1/2% subordinated debentures elect to tender their debentures for cash, the
 Company will purchase a total of $27,059,000 principal amount of old 7 1/2%
 subordinated debentures for cash and the Company will exchange the balance of
 the tendered debentures for new 9 1/2% senior debentures.  All holders who
 elect to receive cash will be treated equally in this process.  It will be a
 condition of the offer that at least $27,059,000 principal amount of old
 7 1/2% subordinated debentures will be tendered for cash.
     As a result of the revisions, holders who elect new 9 1/2% senior
 debentures will receive $1,000 principal amount of new 9 1/2% senior
 debentures for each $1,000 principal amount of their old 7 1/2% subordinated
 debentures, plus accrued and unpaid interest in cash.  It is a condition of
 the offer, as amended, that the Company will exchange no more than $20,000,000
 total principal amount of old 7 1/2% subordinated debentures for new 9 1/2%
 senior debentures.
     The expiration date for the exchange offer has been extended from 11:59
 p.m., New York City time, on April 30, 2001, to 11:59 p.m., New York City
 time, on May 1, 2001.
     The Company said that, as of 11:59 p.m., New York City time, on April 17,
 2001, it had received tenders from holders of $27,153,000 in aggregate
 principal amount of old 7 1/2% subordinated debentures, representing
 approximately 57.7% of the outstanding principal amount of the old debentures.
 It is a condition of the offer that the Company receives valid tenders of at
 least 90% of the aggregate outstanding principal amount of the old 7 1/2%
 subordinated debentures.  In that regard, the Company announced that the
 holders (or their advisors) of approximately $24 million aggregate principal
 amount of old debentures, who have been engaged in discussions with the
 Company concerning the terms of the exchange offer, have agreed to accept the
 revised terms described above.  The Company said a portion of such $24 million
 of old debentures has already been tendered.
     The Company further announced that, as of April 16, it had made the
 interest payment due on March 15, 2001 on its 7 1/2% convertible subordinated
 debentures to the Trustee within the 30-day grace period provided for in the
 indenture governing the debentures.
     Banc of America Securities LLC is the exclusive dealer manager for the
 offer.  D.F. King & Co., Inc. is the information agent and Wells Fargo
 Corporate Trust is the depositary.  Copies of the Preliminary Prospectus and
 Exchange Offer may be obtained by calling D.F. King at (800) 735-3591.
 Additional information concerning the terms and conditions of the offer may be
 obtained by contacting Banc of America Securities LLC at (888) 292-0070.
     CII Financial is a holding company primarily engaged in writing workers'
 compensation insurance in nine western and mid-western states through its
 wholly owned subsidiaries, California Indemnity Insurance Company, Commercial
 Casualty Insurance Company, Sierra Insurance Company of Texas and CII
 Insurance Company.  CII Financial is a wholly owned subsidiary of Sierra
 Health Services, Inc. (NYSE:   SIE), a diversified health care services company
 based in Las Vegas.
 
     Statements in this news release that are not historical facts are forward-
 looking and based on management's projections, assumptions and estimates;
 actual results may vary materially.  Forward-looking statements are subject to
 certain risks and uncertainties, some of which may be found in the Preliminary
 Prospectus and Exchange Offer and other documents filed with the Securities
 and Exchange Commission and which are incorporated herein by reference.
 
     Additional Information and Where to Find It:
     CII Financial, Inc. has filed a Registration Statement with the Securities
 and Exchange Commission on Form S-4 registering the new debentures to be
 issued in the exchange offer.  The Registration Statement and the preliminary
 prospectus contained therein contain important information about CII
 Financial, the exchange offer and related matters.  Security holders are urged
 to read the Registration Statement and the preliminary prospectus contained
 therein, CII Financial's Schedule TO and any other relevant documents filed by
 CII Financial with the SEC.
     The Registration Statement has not yet become effective.  The new
 debentures may not be sold and, although you may tender your old debentures,
 tenders may not be accepted prior to the time the Registration Statement
 becomes effective.  This shall not constitute an offer to sell or an offer to
 buy nor shall there be any sale of the new debentures in any State in which
 such offer, solicitation or sale would be unlawful.
     Security holders are able to obtain copies of the Registration Statement
 on Form S-4 and the preliminary prospectus, CII Financial's Schedule TO and
 any other relevant documents for free through the Web site maintained by the
 SEC at http://www.sec.gov.  In addition, these documents are available free of
 charge by contacting the Information Agent for the offer, D.F. King & Co., at
 (800) 735-3591.  If you have any questions about the offer, please call the
 Dealer Manager for the offer, Banc of America Securities LLC, at
 (888) 292-0070.
 
 

SOURCE CII Financial, Inc.
    LAS VEGAS, April 19 /PRNewswire/ -- CII Financial, Inc. today announced
 the amendment of its pending exchange offer for all $47 million of its
 outstanding 7 1/2% convertible subordinated debentures due September 15, 2001
 (CUSIP No. 12551LAB7).  Under the offer, as amended, holders can choose to
 exchange their old 7 1/2% junior subordinated debentures for either new senior
 debentures or cash.
     The Company said the final terms of the offer consist of the following:
 
     --  The cash purchase price has been increased from $700 per $1,000
         principal amount to $739.12 per $1,000 principal amount, plus accrued
         interest.  The cash offer is for up to a total of $27,059,000
         principal amount of old 7 1/2% subordinated debentures.
 
     --  The Company is offering to exchange the remaining $20,000,000
         principal amount of old 7 1/2% subordinated debentures for new 9 1/2%
         senior debentures.
 
     --  The maturity of the new senior debentures has been shortened from
         March 31, 2005 to September 15, 2004.
 
     --  The covenants applicable to the new debentures have been expanded to
         include limitations on indebtedness, liens, restricted payments, sales
         of capital stock of subsidiaries and transactions with affiliates.
         The covenants also include an excess cash flow offer, asset sale offer
         and change of control offer.
 
     --  In the event of a change of control of CII Financial, holders of the
         new 9 1/2% senior debentures will have the right to require the
         Company to repurchase their new debentures at 100% of the principal
         amount, plus a specified premium declining over time.  The repurchase
         premium will initially be 10%.
 
     Under the amended offer, holders who elect cash will receive $739.12 in
 cash for each $1,000 principal amount of their old 7 1/2% subordinated
 debentures accepted under the cash option, plus accrued and unpaid interest in
 cash.  If holders of more than $27,059,000 total principal amount of old
 7 1/2% subordinated debentures elect to tender their debentures for cash, the
 Company will purchase a total of $27,059,000 principal amount of old 7 1/2%
 subordinated debentures for cash and the Company will exchange the balance of
 the tendered debentures for new 9 1/2% senior debentures.  All holders who
 elect to receive cash will be treated equally in this process.  It will be a
 condition of the offer that at least $27,059,000 principal amount of old
 7 1/2% subordinated debentures will be tendered for cash.
     As a result of the revisions, holders who elect new 9 1/2% senior
 debentures will receive $1,000 principal amount of new 9 1/2% senior
 debentures for each $1,000 principal amount of their old 7 1/2% subordinated
 debentures, plus accrued and unpaid interest in cash.  It is a condition of
 the offer, as amended, that the Company will exchange no more than $20,000,000
 total principal amount of old 7 1/2% subordinated debentures for new 9 1/2%
 senior debentures.
     The expiration date for the exchange offer has been extended from 11:59
 p.m., New York City time, on April 30, 2001, to 11:59 p.m., New York City
 time, on May 1, 2001.
     The Company said that, as of 11:59 p.m., New York City time, on April 17,
 2001, it had received tenders from holders of $27,153,000 in aggregate
 principal amount of old 7 1/2% subordinated debentures, representing
 approximately 57.7% of the outstanding principal amount of the old debentures.
 It is a condition of the offer that the Company receives valid tenders of at
 least 90% of the aggregate outstanding principal amount of the old 7 1/2%
 subordinated debentures.  In that regard, the Company announced that the
 holders (or their advisors) of approximately $24 million aggregate principal
 amount of old debentures, who have been engaged in discussions with the
 Company concerning the terms of the exchange offer, have agreed to accept the
 revised terms described above.  The Company said a portion of such $24 million
 of old debentures has already been tendered.
     The Company further announced that, as of April 16, it had made the
 interest payment due on March 15, 2001 on its 7 1/2% convertible subordinated
 debentures to the Trustee within the 30-day grace period provided for in the
 indenture governing the debentures.
     Banc of America Securities LLC is the exclusive dealer manager for the
 offer.  D.F. King & Co., Inc. is the information agent and Wells Fargo
 Corporate Trust is the depositary.  Copies of the Preliminary Prospectus and
 Exchange Offer may be obtained by calling D.F. King at (800) 735-3591.
 Additional information concerning the terms and conditions of the offer may be
 obtained by contacting Banc of America Securities LLC at (888) 292-0070.
     CII Financial is a holding company primarily engaged in writing workers'
 compensation insurance in nine western and mid-western states through its
 wholly owned subsidiaries, California Indemnity Insurance Company, Commercial
 Casualty Insurance Company, Sierra Insurance Company of Texas and CII
 Insurance Company.  CII Financial is a wholly owned subsidiary of Sierra
 Health Services, Inc. (NYSE:   SIE), a diversified health care services company
 based in Las Vegas.
 
     Statements in this news release that are not historical facts are forward-
 looking and based on management's projections, assumptions and estimates;
 actual results may vary materially.  Forward-looking statements are subject to
 certain risks and uncertainties, some of which may be found in the Preliminary
 Prospectus and Exchange Offer and other documents filed with the Securities
 and Exchange Commission and which are incorporated herein by reference.
 
     Additional Information and Where to Find It:
     CII Financial, Inc. has filed a Registration Statement with the Securities
 and Exchange Commission on Form S-4 registering the new debentures to be
 issued in the exchange offer.  The Registration Statement and the preliminary
 prospectus contained therein contain important information about CII
 Financial, the exchange offer and related matters.  Security holders are urged
 to read the Registration Statement and the preliminary prospectus contained
 therein, CII Financial's Schedule TO and any other relevant documents filed by
 CII Financial with the SEC.
     The Registration Statement has not yet become effective.  The new
 debentures may not be sold and, although you may tender your old debentures,
 tenders may not be accepted prior to the time the Registration Statement
 becomes effective.  This shall not constitute an offer to sell or an offer to
 buy nor shall there be any sale of the new debentures in any State in which
 such offer, solicitation or sale would be unlawful.
     Security holders are able to obtain copies of the Registration Statement
 on Form S-4 and the preliminary prospectus, CII Financial's Schedule TO and
 any other relevant documents for free through the Web site maintained by the
 SEC at http://www.sec.gov.  In addition, these documents are available free of
 charge by contacting the Information Agent for the offer, D.F. King & Co., at
 (800) 735-3591.  If you have any questions about the offer, please call the
 Dealer Manager for the offer, Banc of America Securities LLC, at
 (888) 292-0070.
 
 SOURCE  CII Financial, Inc.