HealthSouth bank debt shot up out of the high 70s into the 88-90 range after the company hosted a conference call last Monday to update its stakeholders on the state of its business. Traders said small pieces of the name changed hands within that context and one suggested that the bank debt could be worth par. "The market seems to be pretty bullish," said one dealer, regarding HealthSouth's debt.
During the call, company officials and their restructuring advisors said HealthSouth is going to try to avoid bankruptcy and noted that a bankruptcy filing has the potential to significantly erode the company's value. "The main conclusion from the presentation is that purely from an operational point of view the expected EBITDA of [$]650 million and the expected cash balance of [$]500 million is more than enough for HealthSouth to meet all its debt service, to honor all its obligations, to avoid bankruptcy and still have value left for the equity holders of this company. But I said purely from an operational point of view," said George Varughese, a managing director at Alvarez & Marsal, according to a transcript of the conference. Alvarez & Marsal is the firm hired to assist HealthSouth with its crisis management and restructuring.
There are a few uncertainties that still plague the company. The Securities and Exchange Commission and the Department of Justice investigations into the company's financial reporting are ongoing and the auditing team from PricewaterhouseCoopers has not yet completed its forensic review of the company's financial statements. HealthSouth hosted a meeting last Wednesday and Thursday for advisors to its creditors, financial advisors and legal advisors. The purpose of the meeting was to present the parties with a more detailed version of the company's business and allow them to start their due diligence. Calls to Bryan Marsal, HealthSouth's chief restructuring officer, were not returned by press time.