LifeCare Holdings Files for Bankruptcy Protection
LifeCare Holdings Inc., an operator of acute-care hospitals owned by Carlyle Group LP (CG), filed for bankruptcy protection, citing debt and losses from Hurricane Katrina and saying it plans to sell the company.
LifeCare, based in Plano, Texas, listed assets of $422 million as of Sept. 30 and liabilities of $576 million in its Chapter 11 filing today in U.S. Bankruptcy Court in Wilmington, Delaware.
The bankruptcy was caused in part by “a significant and unforeseen setback” from Hurricane Katrina in 2005, which destroyed three facilities in New Orleans, Chairman Phillip B. Douglas said in court papers. Cutbacks in Medicare and Medicaid reimbursements compounded financial problems, he said.
LifeCare, which took on about $400 million of debt to help Carlyle fund its 2005 buyout, spent $57.7 million on interest last year, double its total for 2010.
LifeCare said in a court filing that months of negotiations with potential buyers failed to secure an offer that would fully pay $353.4 million owing on a secured credit facility where JPMorgan Chase Bank NA is agent. The company intends to hold an auction where the first-lien lenders will bid using debt rather than cash.
Phillips said the company has 27 hospitals in 10 states, with about 4,500 employees. It was founded in 1992 and opened its first hospital in Shreveport, Louisiana, the following year.
The company said patient care will continue without interruption.
Among the company’s largest unsecured creditors listed in court papers are holders of $128 million in subordinated notes from U.S. Bank NA; and Vibra Healthcare LLC, owed $2.5 million from a promissory note.
The main case is In re LCI Holding Co. Inc., 12-13319, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Phil Milford at firstname.lastname@example.org.