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Kindred Announces Definitive Agreement to Divest Skilled Nursing Facility Business

LOUISVILLE, Ky.--(BUSINESS WIRE)--Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced that it has signed a definitive agreement with BM Eagle Holdings, LLC, a joint venture led by affiliates of BlueMountain Capital Management, LLC (“BlueMountain”), under which it will sell the Company’s skilled nursing facility business for $700 million in cash. The sale includes 89 nursing centers with 11,308 licensed beds and seven assisted living facilities with 380 licensed beds, which collectively have approximately 11,500 employees in 18 states. As detailed below, Kindred expects that the combination of the cash proceeds, anticipated working capital liquidation, tax benefits, retained assets and other items will result in approximate total value to Kindred of $910 million after deducting estimated transaction and severance costs. These results are consistent with the Company’s previously announced expectations.

As previously disclosed, 36 of the skilled nursing facilities (the “Ventas Properties”) are currently leased from Ventas, Inc. (“Ventas”) (NYSE:VTR), and Kindred has an option to acquire the real estate of the Ventas Properties for aggregate consideration of $700 million. As Kindred closes on the sale of the Ventas Properties to BlueMountain, Kindred will pay to Ventas the allocable portion of the $700 million purchase price for the Ventas Properties and Ventas will convey the real estate for the applicable Ventas Property to BlueMountain or its designee.

Kindred expects to realize net value of approximately $210 million, subject to post-closing adjustments, and after the $700 million payment to Ventas, estimated transaction costs of approximately $35 million and estimated severance costs of approximately $35 million. This amount includes approximately $80 million in retained net working capital, the majority of which will be liquidated over late 2017 and early 2018, approximately $140 million(1) of cash tax benefit over time from the creation of an approximately $380 million net operating loss carryforward associated with the sale transaction, and approximately $60 million of value associated with the retained Las Vegas facility, hospital-based sub-acute units and other retained assets.

Benjamin A. Breier, President and Chief Executive Officer of Kindred, commented, “Today’s announcement is a historic milestone for all of Kindred’s stakeholders. Exiting the skilled nursing facility business, in its entirety, has been a long-stated goal of our enterprise. After more than two decades of nursing center operations, this announcement clears the way to closing that chapter of Kindred’s story, and turning the page to the future of integrated post-acute care.”

Mr. Breier added, “The exit and sale of our nursing center operations significantly enhances shareholder value, shifts attention to our higher margin and faster growing businesses, and advances our efforts to transform Kindred’s strategy. Upon completion of this transaction, we believe Kindred’s capital structure, leverage profile and operating performance will all be markedly improved.”

Mr. Breier concluded, “We believe that BlueMountain and the associated new operators will be strong partners in providing leadership for these buildings going forward. We are proud to report that since announcing our divestiture plans, our Nursing Center Division has maintained high standards of care and patient satisfaction, while delivering stable operating results. On behalf of the Kindred Board of Directors and management team, I thank all of our caregivers for their hard work and dedication to our patients, residents and their families throughout this process. We appreciate their continued commitment as we execute a smooth transition.”

Stephen D. Farber, Executive Vice President and Chief Financial Officer of Kindred, remarked, “We expect exiting the skilled nursing facility business will increase Kindred’s annual cash flow by approximately $20 million to $30 million, as we...