Business
HealthSouth loses with bondholders
NEWS IN BRIEF — Posted May 3, 2004
HealthSouth Corp. lost a round in its legal effort to block bondholders from seeking accelerated payments, possibly putting the troubled outpatient services giant at risk for bankruptcy as it tries to revive itself following a massive fraud scandal.
In an order on April 14, Circuit Judge Allwin Horn III in Jefferson County, Ala., denied HealthSouth's request for a preliminary injunction and dissolved a temporary restraining order against the bondholders, who have accused HealthSouth of defaulting on the bonds.
According to published reports, the bondholders are seeking the immediate repayment of more than $2 billion. HealthSouth reportedly argued that the accelerated payment could force the company to seek bankruptcy protection.
In a written statement on April 15, HealthSouth said it had received a notice from the bondholders that they would not pursue accelerated payments for at least 30 days as long as HealthSouth engaged in good-faith negotiations to find a resolution.
Another hearing in the case was set for April 23.
HealthSouth has been accused by federal prosecutors of overstating earnings by $2.7 billion or more over several years in a scheme to meet Wall Street expectations. Seventeen former employees have agreed to plead guilty to various criminal charges, and ousted chief executive Richard M. Scrushy is awaiting trial for fraud.
Note: This item originally appeared at http://www.ama-assn.org/amednews/2004/05/03/bibf0503.htm.
