NEW YORK (AP) -- Overwhelmed with $576 million in debt, hospital operator LifeCare has filed for Chapter 11 bankruptcy protection, and plans to sell itself.
The Plano, Texas, chain runs 27 long-term hospitals Texas, Pennsylvania, and eight other states. It said it will continue to do business and pay its employees through the bankruptcy process.
The company, which was acquired by private equity firm Carlyle Group LP in 2005, said it has agreed to be bought by a group of its senior secured lenders, but hopes to see what results from an auction supervised by the bankruptcy court.
According to a bankruptcy court filing, LifeCare had $575.9 million in debt and $422.2 million in assets. Its biggest creditor is US Bank, which owns $128.1 million in senior notes.
Carlyle Group bought LifeCare for $570 million in August 2005. Weeks later, three of the company's hospitals in New Orleans were destroyed by Hurricane Katrina.
In a bankruptcy court filing, LifeCare said it business has also been hurt by cuts in Medicare payments that were instituted in 2006 and 2007, and by a 2007 moratorium on construction or expansion of long-term acute care facilities.
In 2011 the company paid $131 million as it bought six hospitals to expand its business. Those deals have added to its profit, but not as much as the company had hoped, and its senior notes will mature in 2013.
"Over the course of the first quarter of 2012, it became evident to the board and management that the hoped-for growth and greater regulatory certainty would not materialize in a timeframe that worked for the company," LifeCare said.
LifeCare said Tuesday it has secured $25 million in financing from JPMorgan Chase, although that financing must be approved by the bankruptcy court. The company has around $20 million in cash on hand.
In addition to Pennsylvania and Texas, LifeCare has hospitals in Florida, Louisiana, North Carolina, Nevada, Wisconsin, Colorado, Ohio and Idaho.