HealthSouth Corp. officials say they will decide whether the company must go into bankruptcy at the end of June, after they finish sifting through thousands of inaccurate and possibly fraudulent documents.
Meanwhile, bank lenders will decide Thursday whether to extend a forbearance agreement for $400 million in loans to HealthSouth or push the beleaguered company immediately into bankruptcy. The current forbearance agreement expires at the end of the day Thursday.
HealthSouth officials have said it is not in the lenders' interest to force HealthSouth into bankruptcy, because the Birmingham, Ala.-based operator of ambulatory surgery and rehabilitation centers is still generating cash.
Andy Brimmer, spokesperson for the Birmingham, Ala.-based operator of ambulatory surgery and rehabilitation centers, says the company is "cash-flow positive" but is still waiting to determine whether it will go into bankruptcy.
"At this point, we do not have enough information to make that decision," he says.
Brimmer reports that PricewaterhouseCoopers, the forensic accountant hired to examine HealthSouth's books, says will take until the end of May to complete its task because it has found 300,000 misstated journal entries so far in HealthSouth's books.
Meanwhile, Brimmer says Bryan Marsal, HealthSouth's turnaround specialist, expects to be able to determine the company's "earning power" at the end of June. At that point, the company will know whether it needs to voluntarily enter Chapter 11 reorganization under the federal bankruptcy code, Brimmer says.
Although the company has a total of $3.3 billion in debts and missed a payment of $350 million on a convertible bond issue on April 1, Marsal says HealthSouth most likely will not need to go into bankruptcy, according to Brimmer.
Brimmer says HealthSouth officials have been meeting weekly with the bank lenders and HealthSouth's bond holders, who hold $2.9 million in debt.
Prosecutors say the company inflated earnings by as much as $2.5 billion. All five former chief financial officers for the company have agreed to plead guilty to federal charges of accounting fraud.