"It takes a team of great people to solve a problem and I'm very thankful for the wonderful people at LifeCare."
-Arnold from Wisconsin
Does filing for Chapter 11 mean that LifeCare is going out of business? Will any of its hospitals have to close?
No, LifeCare is not going out of business. Filing a Chapter 11 allows the Company to continue normal operations as it addresses its debt issues. Day-to-day activities at the hospitals and the corporate headquarters continue as normal, and the Company’s relationships with patients, referrers, vendors and suppliers also continue
What does it mean to voluntarily file under Chapter 11?
The Chapter 11 process is a well-established U.S. practice that many companies have used successfully to address their capital structures under court protection. Filing for Chapter 11 protection does not mean a company is liquidating. Ultimately, Chapter 11 provides a way for companies to restructure and reduce their debts while continuing day-today operations. The Company fully intends to continue operations at its hospitals throughout the reorganization process.
So is LifeCare being sold?
Yes, as part of the bankruptcy filing, the Company reached agreement with a group of its lenders for the purchase of substantially all of the Company's assets by a new entity controlled by the lenders. Operations at the corporate offices and hospitals continue as normal, and will continue to do so as the transaction and debt restructuring are completed. As is usual in situations like this, the Company will solicit interest from other parties to ensure the transaction provides the best opportunity moving forward. The Company anticipates the Chapter 11 process will be complete in approximately six months.
Why did LifeCare file Chapter 11?
Several factors – dating back to the loss of three hospitals from Hurricane Katrina and including the recessionary economy and difficult reimbursement environment in which hospitals operate – put considerable strain on the Company’s financial operations in recent years. Though the Company’s hospitals have been very successful in expanding their focus on clinical excellence and strengthening their day-to-day operations, the constraints of the Company’s existing debt structure have prevented it from pursuing growth plans.
Ultimately, the Company determined that pursuing a Chapter 11 bankruptcy filing provides it with the best opportunity to quickly and effectively address its debt issues while allowing its business operations to continue as normal.
What will happen at your hospitals? Will there be layoffs or changes?
No system-wide changes are planned or anticipated. As part of the Company’s ongoing efficiency improvements, they may continue to make some small-scale changes on a local basis, but normal operations continue.
How will the bankruptcy impact employees?
The bankruptcy filing is not expected to have an impact on employees. Operations at the Company’s hospitals and corporate office continue as normal. Employees continue to be paid and receive benefits as normal and their day-to-day jobs continue as usual.
How long will the bankruptcy process last?
We hope to complete the process as quickly as possible but expect it will be done within about six months. Ultimately, obtaining the right result is more important than obtaining a fast one, and the Company has the cash resources and strong operating performance to do that.
Will LifeCare be able to pay vendors and meet its obligations?
The Company fully expects that vendors will be paid under normal terms for goods and services provided on or after the Chapter 11 filing date of December 11, 2012. The Company entered the Chapter 11 process with approximately $20 million of cash. Additionally, they have secured a commitment of $25 million in new “debtor-in-possession” (DIP) financing from its existing lenders, which will be available to help meet their obligations to customers, vendors and employees in the ordinary course of business during the recapitalization process.
Will vendors be paid for goods and services delivered prior to the filing date?
Federal law prohibits the Company from paying for any goods or services purchased or received prior to the Chapter 11 filing date, which was December 11, 2012. Vendors with an outstanding claim are encouraged to file a Proof of Claim form for any pre-filing amounts owed to them. All creditors and potential creditors will be sent a claim form and instructions on where and when to file this claim. Payments on pre-petition claims will be settled as part of a plan of reorganization, which must be accepted by creditors and approved by the Bankruptcy Court. The Company cannot say with certainty when vendors should expect payment for pre-petition invoices. However, goods and services delivered after the filing date can and will be paid for in full. In fact, the Bankruptcy Code gives priority status to such payments, so vendors and suppliers can be assured the Company can and will pay for what is provided going forward.
How do I file a proof of claim?
The Company is preparing a complete list of creditors, and soon an official notice of the bankruptcy filing and Meeting of Creditors will be sent to that list. All listed creditors will be notified of the deadline by which claims will need to be made (this is known as the “bar date”). You can find more information on the claims agent website at www.kccllc.net/LifeCare.
Will vendors need to change their contracts to continue working for the Company?
No. No changes are necessary for vendors to continue working with either the Company or its affiliated hospitals.
Is it safe to continue working with a company that has filed Chapter 11?
Yes, vendors and suppliers can feel comfortable working with the Company and its hospitals. The bankruptcy code provides vendors and suppliers with “administrative claim status,” because the Court recognizes they must be paid for in order for the company to reorganize. Suppliers will be paid as they move forward in their relationships with the Company.
Does the Company have enough cash to meet its payroll and benefit obligations?
The Company entered the Chapter 11 process with approximately $20 million of cash. Additionally, they have secured a commitment of $25 million in new “debtor-in-possession” (DIP) financing from their existing lenders, which will be available to help meet their obligations to customers, vendors and employees in the ordinary course of business during the recapitalization process.