Feds Oppose Settlement Behind $320M LifeCare Sale

Law360, Wilmington (May 21, 2013, 9:26 PM EDT) -- The U.S. government asked a Delaware bankruptcy judge Tuesday to reject a deal underpinning the $320 million sale of private equity-owned LifeCare Holdings Inc., saying the proposed settlement is impermissible because it would pay the hospital group's unsecured creditors ahead of federal tax claims.

Under the terms of the deal, unsecured creditors would receive about $3.5 million in cash in exchange for the creditors committee supporting LifeCare's Chapter 11 plan, which includes its credit-bid sale to private equity firm Carlyle Group LP.

But the settlement, proposed by...
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