They also said it might not have the funds to continue operating if that were to happen.

The Columbia mental health insurer, the nation's largest, said it expected not to be in compliance with the terms of its bank loans when it files results in January for its fourth quarter and fiscal year that ended yesterday. Unless it obtains waivers, the lenders would have the right to demand early repayment, Magellan said.

"If such waivers cannot be obtained, the company would not have the liquidity necessary to repay debt if it were accelerated, and its ability to obtain liquidity for its operations would be uncertain," the company said in a statement.

Magellan's loan agreement specifies that as of yesterday its debt could not be higher than five times annual earnings. The company's debt, about $1 billion, was built up in acquiring several rivals. It insures 68 million people.

Magellan indicated that it had unsuccessfully sought to refinance its bank debt by yesterday's deadline. Instead, it said, it will focus on other means of reducing debt, including possible capital restructuring. The company has hired Gleacher Partners LLC to help with debt reduction.

"It's premature to speculate about what's going to happen a few months down the road," said Erin Somers, a spokeswoman for Magellan.

But analysts said the company's outlook was problematic.

"The fact that they're still working on it is not a positive," said Todd Richter, an analyst with Banc of America Securities in New York. "This is a deadline that they've known about for years." A bankruptcy filing is a possibility, he said.

"The fact that the stock is trading for 29 cents is an indication that investors do not perceive a lot of equity value there," Richter said. "Stocks don't trade at 29 cents unless investors think there is a chance of a Chapter 11 filing."

In August, Standard & Poor's lowered the company's debt rating to B-minus - its second downgrade in three months. That move followed Magellan's report of earnings below analysts' estimates for the fiscal quarter that ended June 30.

"It seems like a marking time announcement," Charles Titterton, an S&P analyst, said yesterday. "Apparently there's nothing yet to be announced with their financing."

Titterton said he plans to talk with Magellan officials within the next few days.

Magellan said it was paying its bills on time.

"The company's cash flow from operations continues to be positive and the company remains current on all payments to its providers, vendors, suppliers and lenders," Mark S. Demillo, chief financial officer said. "We believe we have the financial resources to remain current on all operating obligations and to continue investing in our business while we work to reduce our debt, absent an acceleration of our debt maturities."

Magellan also said that board members Darla D. Moore and Jeffrey A. Sonnenfield have resigned.