HealthSouth in tentative deal with debtholders

HealthSouth Corp., Birmingham, Ala., said it has reached a tentative agreement with several groups of debtholders that have been threatening for months to demand early repayment of the company's debt, possibly jeopardizing its recovery from a multibillion-dollar fraud scandal. The groups, which hold $1.9 billion of HealthSouth's $2.6 billion public debt, tentatively agreed not to declare the company in default of lending terms in exchange for cash payments of $30 per $1,000 debt principal to $45 per $1,000 principal. HealthSouth previously had offered debtholders $13.75 per $1,000 principal in exchange for consenting to the company's violations of lending terms. HealthSouth has not reported financial results since the third quarter of 2002, a technical default under bond and note agreements, and does not expect to report any until 2005 because of the massive accounting fraud at the company. Groups representing HealthSouth's remaining debt accepted earlier consent offers. In all, HealthSouth said it will pay investors $73 million to $80 million under the agreements. The company said the deadline for accepting its latest offer is June 23. -- by Julie Piotrowski