HealthSouth Corp., Birmingham, Ala., the nation's largest operator of rehabilitation and ambulatory surgery centers, said late Monday that it has received a notice of default on some of its debt payments.
HealthSouth officials are dismissing the move as a public negotiating tactic that will have little effect on its operations, including a new agreement to deploy 5,000 mobile tablet-type computers to clinicians at 1,400 rehab facilities nationwide over the next two to three years.
According to the company, unspecified bondholders are claiming that HealthSouth is in technical default on payments of senior notes and senior subordinated notes, giving the bondholders the right to impose an accelerated payment schedule. That has not happened, and talks with creditors continue, spokesperson Andy Brimmer says.
"While there are natural tensions that arise in any negotiation process, today's action we believe is a very public tactic by the holders of these notes to try to extract greater value at the expense of our other stakeholders," interim Chairman Joel Gordon says in a statement issued Monday afternoon.
HealthSouth says it is current on all interest payments, though it has been in default on about $344 million in junior notes since April. The company says creditors have not accelerated those payments.
Brimmer says the financial disclosure is "completely unrelated" to the computer deal, which PC vendor Motion Computing, Austin, Texas, calls among the single largest orders of tablets to date.
Motion Computing says HealthSouth will buy 5,000 units of the Motion M1300 Tablet PC, slate-style machines with the tablet edition of Microsoft Windows XP, electronic stylus input devices and built-in wireless connectivity. The computers will run TherapySource management and clinical records software from Source Medical Solutions, a Birmingham-based company one-third owned by HealthSouth.
Terms of the deal were not disclosed, though a HealthSouth spokesperson says the implementation, which is under way, will take 24 to 36 months to complete.
HealthSouth says it has the money to buy the computers, despite recent financial and legal woes. HealthSouth has forecast pre-tax earnings of $650 million for the 12-month period ending June 30, 2004.
"The company has reasonably healthy cash flow," Brimmer says.
HealthSouth is under federal investigation for allegedly overstating company profits by $2.5 billion since 1997 and inflating the value of its assets by $800 million in public financial reports. Fifteen former executives have admitted to federal fraud charges, though the company itself has not been charged with any crime.
HealthSouth has disavowed its financial statements from the years in question and is in the process of restating its earnings reports.