Healthcare lender DVI loses its auditor, stock hit.
06/04/2003
Reuters English News Service
NEW YORK, June 4 (Reuters) - DVI, Inc., a healthcare finance company, said on Wednesday it was looking for new auditors after Deloitte & Touche resigned as its accountant, an announcement that sent its shares some 10 percent lower.
DVI, in a statement, did not disclose the reasons for Deloitte & Touche's resignation, but the decline of the company's stock reflected investor concern about possible irregularities.
"Obviously, right now, nobody wants to go near companies that have slightest whiff of accounting issues," said Rafi Zaman, senior portfolio manager at DuPont Capital Management in Wilmington, Delaware. His firm has invested in shares in the company, but he declined to comment as to whether DuPont Capital still owned them.
DVI's shares are also under pressure because it is leaving a major small-cap stock index at the end of the month, Zaman said. Investors that manage certain index funds will then have to sell the shares, which encourages other investors to sell before the change.
DVI (DVI.N) finances the purchase of medical equipment to healthcare providers through loans and leases and also offers lines of credit collateralized by patients' bills. The company has some $2.7 billion of financed assets.
Another healthcare finance company of similar size, National Century Financial Enterprises, filed for bankruptcy in November after Deloitte & Touche refused to sign off its 2001 financial statements and investors stopped lending it money.
Investors in bonds sold by National Century have alleged fraud, although the founders of the firm deny wrongdoing.
But in the case of DVI, Deloitte & Touche's resignation may or may not signal trouble, said Stephen Ryan, a professor of accounting at New York University's Stern School of Business.
"There was probably a dispute over something, it could be fees, accounting methods, any number of things. It's too soon to speculate, and it may mean nothing at all," he said.
DVI has said last month that it expected to next raise funds in the fall. Last month it sold some $429 million of asset-backed securities.
The company's stock fell 10.24 percent to $7.10 on Wednesday. Officials at DVI were not immediately available for comment. A spokeswoman for Deloitte & Touche referred calls to DVI.