Heritage Partners Completes Innovative Recapitalization Of Skilled Healthcare Group

Heritage Partners, a Boston-based private equity firm, announced today the completion of an innovative $420 million recapitalization of its portfolio company, Skilled Healthcare Group (SHG).

Proceeds from the new debt issue will repay existing indebtedness, and will provide a significant distribution to Heritage and the Company’s other shareholders. In addition, the Company announced at its lenders presentation that it has hired CSFB to explore strategic alternatives, including an IPO or a sale of the Company. To facilitate a possible sale, Credit Suisse First Boston LLC, which was the sole arranger of the financing, created a debt product that allows a qualified buyer to assume the new capital structure without any penalties or changes in terms. This structure streamlines a potential sale process by eliminating the need for a buyer to raise debt financing while capitalizing on attractive current market conditions.

Mark Jrolf, general partner of Heritage Partners, commented: “This unique recapitalization makes sense for SHG. The Company is in its fifth straight year of double-digit earnings growth, enjoys a leading position in its professions, and has consistently met or exceeded its forecasts. The credit markets have been extremely supportive of the Company in the past and wanted to continue with this Company and its management team. The structure of this new financing provides SHG shareholders with an attractive distribution today while preserving the option to pursue an IPO or sale of the Company.”

Boyd Hendrickson, SHG’s Chief Executive Officer, added: “The opportunity to access the public equity markets or to associate with additional financial partners will enable the Company to accelerate its growth strategy. We believe this process will present greater opportunities for our employees while SHG continues to provide industry leading quality of care within our local communities.”

The Skilled Healthcare Group organization operates 71 long term care facilities in the western United States, specializing in the care of medically complex sub-acute cases. The Company provides state-of-the-art in-patient care, rehabilitation therapy, pharmacy and hospice services. In 2004, the Company generated over $400 million of revenue with industry leading operating margins. Demand for services provided by long-term care facilities such as Skilled Healthcare is expected to increase substantially as the population ages and payors demand cost-effective care. Long-term care facilities are strategically positioned, as they provide an efficient cost alternative and have similar clinical outcomes as more costly settings such as long-term acute care hospitals and in-patient rehabilitation facilities.

About Heritage Partners
Heritage Partners, a Boston-based private equity firm, specializes in private equity for family-owned businesses and closely-held companies.  Through its unique Private IPO^® structure, Heritage enables the owners of successful middle-market companies to realize significant liquidity from their businesses while maintaining a large equity investment and ongoing control of their business.  Heritage serves as an experienced strategic partner for such businesses as they seek to grow through acquisitions, organic business and operational improvements.  For more information, please see: www.heritagepartnersinc.com.

About Skilled Healthcare Group
Skilled Healthcare subsidiaries operate 70 long-term care facilities in the western United States, specializing in the care of medically complex sub-acute cases. The subsidiaries provide state-of-the-art in-patient care, rehabilitation therapy and hospice services. In 2004, the Company generated over $400 million of revenue.