Jay J. Levin was named president of Magellan Health Services Inc. His title was incorrect in a Nov. 2 Business section article. (Published 11/4/02)

Magellan Health Services Inc.'s chief executive resigned yesterday after just 13 months of trying to lead the struggling Columbia-based mental-health-care company through a painful restructuring.

Daniel S. Messina's decision to step down came as Magellan's banks granted a temporary reprieve, assuring that the company won't go into technical default on its $300 million in bank debt at least until Dec. 31.

But the nation's largest provider of mental-health services warned that it still expects to violate its bank agreements in January, an event that would allow its lenders to demand immediate repayment and, analysts say, could send Magellan into bankruptcy.

Messina, a former executive at Aetna U.S. Healthcare, joined Magellan in 2000 and was named chief executive in October 2001.

Magellan grew quickly through acquisitions in the late 1990s but has struggled with high costs. As chief executive, Messina oversaw the layoffs of 565 workers and otherwise tried to cut expenses. Magellan has 5,839 employees.

Messina could not be reached for comment yesterday.

Magellan spokeswoman Erin S. Somers said Messina, whose resignation was effective immediately, wanted to pursue other business opportunities. He will remain a member of Magellan's board of directors.

"It was a decision on his part, and I can't speak to what prompted that," Somers said.

Thomas H. Shinkle Jr., a debt analyst with Imperial Capital LLC of Beverly Hills, Calif., said he was not surprised by Messina's departure, given the financial problems that plague Magellan.

"One can only imagine that he felt that it was beyond what he wanted to get involved with," Shinkle said.

The company promoted Chief Operating Officer Jay J. Levin as interim chief executive.

Magellan's largest customer is also a matter of concern. During an earnings conference call this week, Aetna Inc. said it would not decide whether to renew its contract with Magellan until early next year. In a filing Thursday with the Securities and Exchange Commission, Aetna said Magellan is scheduled to pay it $60 million in February 2003 under a long-term agreement

Magellan also said its bondholders formed a committee to negotiate ways to reduce the company's debt. In addition to its bank debt, Magellan has $695 million in bond debt.

Charles Titterton, an analyst for Standard & Poor's Corp., which lowered Magellan's credit rating last month, said yesterday's news would not affect S&P's developing outlook.

"It doesn't reduce or increase materially the possibility the company will either go bankrupt or stay a going concern," Titterton said. "The company could go either way."

Staff researcher Richard Drezen contributed to this report.

Daniel S. Messina oversaw the layoffs of 565 workers as CEO of Magellan Health Services.