Sun Healthcare Group, Inc. (NASDAQ: SUNH) announced Monday that it intends to separate the company into two separate publicly traded companies. The split will separate all of Sun’s operating subsidiaries and continue to use the Sun Healthcare name and brands as the real property portfolio will be spun off into a real estate investment trust (REIT) and will own almost all of Sun’s currently owned properties. The REIT will operate under the name Sabra Health Care REIT, Inc.
The split will will be effected through a distribution to Sun stockholders of the common stock of the Operating Company. Prior to the spin-off, Sun anticipates raising additional capital through an offering of its common stock, and, in connection with the spin-off, each of the Operating Company and the REIT is expected to enter into new credit facilities. Proceeds from the equity and debt financings and cash on hand will be used to repay Sun’s outstanding 9.125 percent Senior Subordinated Notes and the outstanding term loans under Sun’s existing credit facility.
Mr. Matros, Sun’s chairman and chief executive officer, stated, "After considering a number of alternate strategies, our management and board of directors have concluded that separating our real property asset base from our operating assets is in the best interests of our stockholders because it will create two highly-focused companies. The REIT will be in a position to realize the full value of our real estate portfolio and strategically expand it. The Operating Company will have the ability to pursue the same growth strategies that it has today, albeit with significantly less debt on the balance sheet. This separation will enable us to concentrate on building a strong healthcare real property company, as well as continuing to provide quality care to residents and patients through the Operating Company. We expect that the two public companies will each provide a platform that more readily enables stockholders to realize value in their holdings than Sun does today."
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