HealthSouth Completes Recapitalization, Prepayment of Existing Indebtedness

HealthSouth Corporation, based in Birmingham, Alabama, (OTC Pink Sheets: HLSH) has completed its previously announced plan to prepay substantially all of its existing indebtedness with proceeds from a series of recapitalization transactions, the company announced.

HealthSouth has entered into a credit agreement that provides up to $2.55 billion of senior secured financing with a consortium of financial institutions and an interim loan agreement that provides $1 billion of senior unsecured interim loans. HealthSouth used a portion of the proceeds of the loans under the senior credit facility, the proceeds of the interim loans and the proceeds of $400 million from its previously announced issuance and sale of 400,000 shares of 6.50 percent Series A Preferred Stock, completed on March 7, 2006, along with cash on hand, to prepay substantially all of its existing indebtedness and to pay fees and expenses related to such prepayment and the recapitalization transactions. The remainder of the proceeds and availability under the senior credit facilities are expected to be used for general corporate purposes. HealthSouth anticipates refinancing the $1 billion interim loans in the second quarter or third quarter of 2006 through an issuance of debt securities.

"This is another major step in HealthSouth's efforts to put our past behind us," said HealthSouth President and CEO Jay Grinney. "We are very encouraged by the strong support we have received through this process and believe this capital structure provides us with the flexibility necessary to manage our debt while implementing our plans for future growth."

HealthSouth Chief Financial Officer John Workman added, "The new capital structure is a significant step in strengthening our balance sheet. It allows us to better execute on key operational initiatives, address the changing regulatory environment, take advantage of the strong capital market conditions, and maximize pre-payable debt to allow for future de-leveraging."

As part of the recapitalization transactions, HealthSouth also announced that it successfully completed its previously announced cash tender offers and related consent solicitations for $2.03 billion of outstanding senior notes and $319 million of outstanding senior subordinated notes. The tender offers expired at 5 PM EST March 9, 2006 (the "Expiration Time"). As of the Expiration Time, $1,996,842,000 in aggregate principal amount of senior notes, representing 98.4 percent of the senior notes, and $288,964,000 in aggregate principal amount of senior subordinated notes, representing 90.5 percent of the senior subordinated notes, were validly tendered for purchase and not withdrawn, and HealthSouth has accepted such notes for purchase. The aggregate purchase price, including accrued and unpaid interest and the consent payment, was approximately $2,530,331,119.

J.P. Morgan Securities Inc., Citigroup Global Markets Inc., and Merrill Lynch & Co. were the co-lead arrangers and joint bookrunners for the $2.55 billion senior secured credit facilities and Merrill Lynch & Co., Citigroup Global Markets Inc., and J.P. Morgan Securities Inc. were the co-lead arrangers and joint bookrunners for the $1 billion interim loans. Deutsche Bank Securities Inc., Goldman, Sachs & Co., and Wachovia Capital Markets LLC were the co-managers for the senior secured credit facilities and the interim loans.

HealthSouth Completes Recapitalization, Prepayment of Existing Indebtedness

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HealthSouth Completes Recapitalization, Prepayment of Existing Indebtedness

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