Bright Health staring down bankruptcy, needs to raise $300M, execs say

Bright Health Group needs to raise about $300 million to avoid bankruptcy after it overdrafted its credit, executives told investors on Wednesday.

Chief Financial Officer Cathy Smith said that the company spent the $350 million available in its revolving credit facility, violating its liquidity covenant with its lenders as it is required to keep at least $200 million in that account. The company did secure a waiver and must address the shortfall by the end of April.

CEO Mike Mikan said Bright Health took an unexpected $70 million hit on investment income as well as a settlement of more than $1 billion for risk adjustment on its newly scuttled Affordable Care Act (ACA) insurance business.

He said the executive team is working with its board of directors to pursue the cash infusion as well as establish a long-term capital structure that better reflects its new business focus without the "volatility" of the ACA plans in play.

"We recognize that at this stage we have much to prove and that is exactly what we intend to do," Mikan said.

Volatility is nothing new for insurtechs like Bright Health, a crop of which all went public around the same time and have since then struggled to chart a path forward. Oscar Health and Clover Health also posted losses in the fourth quarter and for all of 2022, as all of these companies have pushed for profitability.

Bright elected to exit the ACA exchange market to stabilize its business, and executives were confident that, should they meet their credit obligations, the move was the right one for the company's future.

The insurtech posted a $669.6 million loss in the fourth quarter, down from $816.2 million in the fourth quarter of 2021. It also posted a net loss of $1.4 billion for the full year 2022, up from $1.2 billion in 2021.

Revenues grew both in the fourth quarter as well as in the full year, according to the company's earnings report. Bright Health reported $551.4 million in revenue for the fourth quarter, an increase from $380.2 million in the prior year's quarter.

Full-year revenues were $2.4 billion in 2022 compared to $1.5 billion in 2021.

The company expects 2023 revenue of between $2.9 billion and $3.1 billion, and that its adjusted earnings before interest, taxes, depreciation and amortization will be profitable this year.

The looming credit insolvency is just one of the financial woes Bright Health is staring down in the early part of this year. It is at risk of being booted from the New York Stock Exchange if it does not stabilize its stock price above $1 before May.