Hospital sales to fund call for HealthSouth's $164 million 10¾% notes

By Toni Weeks

San Diego, Aug. 1 - HealthSouth Corp. said it will redeem the remaining $164 million of its 10¾% senior notes due 2016 with the proceeds from the sale of five of its six long-term acute care hospitals to affiliates of LifeCare Holdings, Inc., according to a company press release.

The $117.5 million sale of the hospitals was completed Aug. 1 and was financed with cash and retained working capital.

The redemption will occur on Sept. 1 and, including the call premium, will require $175 million of cash. The company plans to use the proceeds from the sale of the hospitals, revolver capacity and cash on hand to fund the redemption.

As previously reported, the repayment of the remaining balance is expected to decrease HealthSouth's interest expense by about $18 million in the second half of 2011 compared to the first half of the year.

The company repaid $335 million of the 10¾% notes on June 15, for which it took a $26.1 million, or $0.28 per share, pre-tax loss on early extinguishment of debt. HealthSouth expects to record an additional $13 million loss on early extinguishment of debt in the third quarter for the planned redemption of the remaining 10¾% notes, the report noted.

The company said it will update its full-year 2011 earnings-per-share guidance to $1.17 to $1.22 per share due to the dilutive impact of the loss on early extinguishment of debt associated with the complete retirement of the 10¾% notes.

HealthSouth is a Birmingham, Ala.-based provider of inpatient rehabilitation services.

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