LifeCare parent emerges from Chapter 11 bankruptcy; asset sale closes

By Caroline Salls

Pittsburgh, June 4 - LifeCare Holdings LLC parent Hospital Acquisition LLC said it completed its purchase of substantially all of the assets of LCI Holdco, LLC and emerged from the Chapter 11 bankruptcy process.

According to a news release, the $320 million sale, which was approved by the U.S. Bankruptcy Court for the District of Delaware, results in a significant reduction in debt at lower interest rates.

The company said its new credit facility includes a $200 million term loan and access to a $30 million working capital line of credit.

LifeCare's Plano, Texas-based management team will continue to lead the company, the release said.

"With a greatly improved debt structure, the company's financial position now better reflects the clinical strength we consistently achieve on the hospital level," LifeCare Holdings chairman and chief executive officer Phillip B. Douglas said in the release.

"We achieved impressive operational performance in the first quarter and are positioned to continue to lead our industry space in clinical outcomes and quality excellence."

As previously reported, LCI Holdco received court approval last week of a settlement that will allow unsecured creditors will split about $3.5 million.

Hospital Acquisition agreed to pay the settlement amount at the closing of the sale.

Agreement terms

The terms of the approved settlement include the following:

• Avoidance actions against the unsecured creditors will be released. The committee said the releases will result in a recovery of $1.05 million to $2.45 million for general unsecured creditors, in addition to a cash distribution;

• The buyer will make a $1.5 million lump sum payment for the benefit of general unsecured creditors, except for the holders of 9¼% senior subordinated notes due 2013;

• A one-time distribution of $2 million will be made to notes trustee U.S. Bank NA for the noteholders;

• Pre-bankruptcy and post-bankruptcy secured lenders have agreed to subordinate their $35 million deficiency claim and waive any recovery from any distribution of the general unsecured creditor funds; and

• The buyer will pay an additional $150,000 of committee professional fees and indenture trustee fees and expenses.

LifeCare, a Plano, Texas-based health-care consulting and management services company, filed for bankruptcy on Dec. 11. Its Chapter 11 case number is 12-13319.

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