HealthSouth committee says discussions continue

By Jeff Pines

Washington, May 3 - HealthSouth Inc. may have extended its consent solicitation to May 13, but negotiations with the unofficial bondholders continue, the committee said.

HealthSouth also increased its consent fee to $13.75 per $1,000 from $10 per $1,000 in principal. Among the proposed changes to the indenture is an amendment that would prevent noteholders from accelerating the company's debt, the committee said.

The company wants consents and waivers from the holders of its 6 7/8% senior notes due 2005, its 7 3/8% senior notes due 2006, its 7% senior notes due 2008, its 8½% senior notes due 2008, its 8 3/8% senior notes due 2011, its 7 5/8% senior notes due 2012, and its 10¾% senior subordinated notes due 2008.

While the committee likes the company's move to increase the consent fee, it feels the consideration should be higher, said Brad Eric Scheler of Fried, Frank, Harris, Shriver & Jacobson LLP, counsel to the unofficial bondholders' committee in a news release.

Its reasons were the HealthSouth's continued substantial credit risk profile; its continued failure to file financial reports and its acknowledgement that it may not be able to timely file such reports until the calendar year 2006; the costs that would otherwise be incurred by the company in refinancing its bond debt; in the context of such a refinancing, the probable need for it to collateralize some of its now unsecured bond debt; and the material nature of the newly proposed and previously proposed amendments to the indentures.

The committee believes the HealthSouth should pay bondholders more if it wants their consents. It is also concerned that the company is not going to resolicit consents from those noteholders who have already given their consents.

The company has been in default under its indentures since March 2003, when it announced that the public could no longer rely upon its financial statements.

The committee remains cautiously optimistic that it will achieve a consensual arrangement with HealthSouth.

HealthSouth provides outpatient surgery, diagnostic imaging and rehabilitative healthcare services.

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