LifeCare wins approval of bid procedures, final DIP, cash collateral

By Jim Witters

Wilmington, Del., Jan. 23 - LCI Holdco, LLC, parent company of LifeCare Holdings, Inc., received the go-ahead for its bid procedures and won final approval for $25 million of debtor-in-possession financing and use of $20 million of cash collateral during a Jan. 23 hearing in the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, stalking-horse bidder Hospital Acquisition LLC is owned by LifeCare's senior secured lenders.

Hospital Acquisition's offer includes a $320 million credit bid, plus cash to cover administrative expenses, LCI attorney Kenneth S. Ziman said.

To encourage potential third-party bidders, the lenders that are part of Hospital Acquisition may individually provide financing to other entities.

Ziman said the debtors hope to sell the entire company to one buyer or to a consortium that will take all the assets.

The debtors anticipate no return to unsecured lenders, with the case likely to convert to Chapter 7 following the anticipated March sale, Ziman said. No Chapter 11 plan is contemplated.

Sale procedures

The amended bidding procedures approved Jan. 23 include the following:

• A March 13 bid deadline;

• A March 20 auction, if other qualified bids are received;

• If no auction is needed, the sale hearing will be March 21;

• If an auction is conducted, the sale hearing will be April 2;

• An initial $3 million overbid protection;

• Subsequent bids at auction must be for at least $1 million more than the previous bid; and

• If Hospital Acquisition fails to emerge as the successful bidder, as much as $750,000 in sale-related expenses will be reimbursed.

DIP details

As previously reported, LCI's DIP financing is through JPMorgan Chase.

The facility includes a $15 million term loan and a $10 million revolving facility.

The DIP loans will mature in six months, with the possibility of a 90-day extension.

Interest on the term loans will be either Base rate plus 800 basis points or Eurodollar plus 900 bps, and interest on revolving loans will be either Base rate plus 350 bps or Eurodollar plus 450 bps.

LifeCare is a Plano, Texas-based health care consulting and management services company. The Chapter 11 case number is 12-13319.

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