NEW YORK, July 26 (Reuters) - PacifiCare Health Systems Inc.(NasdaqNM:PHSY - news), one of the nation's largest health coverage providers, will be pressed to find a new source of funding by the end of December when hundreds of millions in bank debt comes due, analysts said.

PacifiCare is exploring alternative financing after a $1 billion debt package could not be completed earlier this week, sources said.

``PacifiCare needs to find a way to work through its debt issues,'' ABN AMRO analyst Peter Costa said. ``If it can't, it has major problems, which could include bankruptcy or a dilutive private equity infusion.''

The company did not say how much bank debt is due at the end of the year. Media reports list the total at $800 million, but the company's most recent filing with the Securities and Exchange Commission of its quarterly results in May lists $735 million of long term liabilities due within a year as of March 31 while the company had $1.23 billion in cash and equivalents.

Ben Singer, a spokesman for the Santa Ana, California-based managed healthcare provider, said the company would likely issue an official statement later on Thursday.

PacifiCare's stock fell $1.58 or 10.21 percent to $13.90 on Thursday. The stock has a 52-week range of $9.81 in November and a high of $68.69 in August.

Analysts said Morgan Stanley Dean Witter & Co. was unable to sell $600 million in high-yield, 10-year notes issued by PacifiCare amid a lack of interest from investors.

A $400 million loan that was tied to the offering also fell through, they said.

MEDICAL COSTS WEIGH ON PACIFICARE

Analysts said the offering's failure reflected the current weak economic environment along with investor concerns that PacifiCare's costs will rise due to its current renegotiation of contracts with doctors and hospitals.

PacifiCare offered earnings guidance for 2001 in April of $2.94 a share, but the company lowered earnings expectations in May to $1.65-$1.75. On July 16, the company raised its second earnings forecast to 45 cents per share from 39 cents.

Analysts have said the company has been erratic in its forecasts.

``They are focused in a sector -- Medicare -- that has an uncertain outlook,'' said Shellie Stoddard, an analyst at bond rating agency Standard & Poor's.

S&P in late June assessed the note offering firmly in junk bond territory with a rating of double 'B' minus.

PacifiCare is the nation's largest provider of Medicare managed healthcare plans for the elderly.

Besides the difficulties in the Medicare market that many of its rivals have exited, PacifiCare is using a HMO (Health Maintenance Organization) model to insure its customers as the market moves toward a PPO (Preferred Provider Organization) that gives customers more choice but makes it more difficult to predict costs, Costa said.

Also, PacifiCare is having difficulty from the unwinding of capitation, the practice of paying doctors a fixed fee per patient regardless of the cost of care. PacifiCare has changed the way it pays doctors and hospitals in a move away from capitation, but that has led to higher costs.

PacifiCare announced on Monday an extension of the expiration date of its tender offer for $100 million in outstanding 7 percent senior notes. The tender, which was set to expire on July 23, was extended to July 30.

The company needs to refinance the $100 million in notes as well as the bank debt that matures in December.

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-- Anonymous, July 30, 2001