HealthSouth to redeem balance of 10¾% notes due 2016 in third quarter

By Toni Weeks

San Diego, July 27 - HealthSouth Corp. intends to redeem the remaining balance, about $161 million, of its 10¾% senior notes due 2016, according to the company's second-quarter earnings release.

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 release noted.

The redemption of the remaining notes will be funded using proceeds from the $117.5 million sale of five of HealthSouth's six long-term acute-care hospitals, which is expected to settle next week, cash on hand and borrowings under its revolving credit facility.

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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