LifeCare unsecured creditors to get plan distribution under settlement

By Caroline Salls

Pittsburgh, April 29 - LCI Holding Co., Inc.'s official committee of unsecured creditors requested court approval of a settlement related to the sale of substantially all of the company's assets to Hospital Acquisition, LLC, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

LCI is the parent of LifeCare Holdings, Inc.

The committee said approval of the settlement terms will resolve an existing dispute between the creditor group, the buyer and the company's secured lenders in furtherance of the asset sale.

The committee said it has sought to achieve some recovery for the general unsecured creditors throughout the LCI debtors' bankruptcy cases, while also seeing the debtors' going concern business survive in a way that will benefit general unsecured creditors, the buyer, the estate and the other creditors.

As a result, the committee said it has developed a path that will lead to a recovery and a stronger business going forward.

Specifically, the settlement provides a recovery for unsecured creditors and ensures much needed support for the buyer from the debtors' creditor constituency.

Agreement terms

The terms of the proposed settlement include:

• Avoidance actions against the unsecured creditors will be released. The committee said the releases will result in a recovery of $1.05 million to $2.45 million for general unsecured creditors, in addition to a cash distribution;

• The buyer will make a $1.5 million lump sum payment for the benefit of general unsecured creditors, except for the holders of 9¼% senior subordinated notes due 2013;

• A one-time distribution of $2 million will be made to notes trustee U.S. Bank NA for the noteholders;

• Pre-bankruptcy and post-bankruptcy secured lenders have agreed to subordinate their deficiency claim and waive any recovery from any distribution of the general unsecured creditor funds; and

• The buyer will pay an additional $150,000 in committee professional fees and indenture trustee fees and expenses.

The committee said the agreement is expected to yield a cash distribution for general unsecured creditors of 7½% and a value distribution of between 12¾% and 19¾%. Noteholders will recover 1.7%.

The committee has requested a May 7 hearing.

LifeCare, a Plano, Texas-based health care consulting and management services company, filed for bankruptcy on Dec. 11. Its Chapter 11 case number is 12-13319.

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