MedCath completes sale of BHH to CCG

MedCath Corporation (Nasdaq: MDTH) announced that it entered into a definitive equity purchase agreement and completed the sale of its 53.31% equity interest in Bakersfield Heart Hospital ("BHH") and its secured loans to BHH to Cardiovascular Care Group ("CCG").  The transaction was effective June 30, 2012.  Navigant Capital Advisors provided advisory services to MedCath related to the transaction.

The purchase price for MedCath's equity interest and secured loans is approximately $38.1 million subject to post-closing working capital adjustments.  MedCath anticipates it will receive approximately $34.0 million in cash from the transaction after payment of taxes and closing costs.  By completing this transaction, MedCath has realized the value of BHH reflected in its March 31, 2012 Form 10- Q filed with the United States Securities and Exchange Commission (the "SEC") on May 10, 2012. The anticipated net cash proceeds do not include an estimate of BHH's liability, if any, retained by MedCath arising out of the Department of Justice's ("DOJ's") national investigation regarding implantable cardioverter defibrillators (the "ICD Investigation") . The purchase agreement obligates MedCath to indemnify CCG for 53.31% of BHH liabilities arising out of the ICD Investigation for the period prior to closing.

"We have now sold all 10 of our hospitals since announcing in March 2010 that we had formed a Strategic Options Committee to consider the sale either of the entire company or our assets," said Art Parker, MedCath's CEO. "We're proud of the focus we always maintained during this process on high-quality patient care, and we wish the new owners great success."

On August 17, 2011, MedCath filed a proxy statement with the SEC (the "Proxy") seeking stockholder approval of a plan of complete liquidation and dissolution of the Company (the "Plan of Dissolution").  The stockholders of MedCath approved the Plan of Dissolution on September 22, 2011.

MedCath's Board of Directors believes the conditions outlined in the Proxy to file a certificate of dissolution in accordance with Section 275 of the General Corporation Law of the State of Delaware ("DGCL") (the "Filing") by September 22, 2012 have been satisfied.  As a result, the Company currently anticipates making the Filing on or about September 22, 2012 and making a liquidating distribution to its stockholders as part of the Plan of Dissolution prior to the Filing (the "Pre-Filing Distribution") currently estimated to be in the range of approximately $5.75 to $6.25 per share. 

Based on prior history, the Company does expect that it will incur contingencies during its wind-down period that it cannot accurately estimate at this time.  Therefore, the estimated Pre-Filing Distribution was derived using the Company's current estimate of a cash holdback of approximately $48.0 to $58.0 million (the "Holdback").  The Holdback will be used to satisfy all of the Company's estimated contingent liabilities, including without limitation (a) any liabilities arising out of the DOJ's ICD Investigation, the exact amount of which is currently unknown, (b) other currently unknown or unanticipated liabilities due to the government for unknown reimbursement claims, such as recovery audits ("RAC" audits), cost report settlements, and any other unknown contingent liability that may arise during the normal course of operations during the wind-down period, including legal claims and governmental investigations, as previously disclosed, and (c) a reserve of such additional amount as the Board of Directors determines to be necessary or appropriate under the DGCL with respect to additional liabilities that may arise or be identified after the Filing. 

The Pre-Filing Distribution and the Holdback do not take into consideration any tax benefits that may be realized as part of the wind-down process, including the payment of contingent liabilities related to the Holdback.  The Pre-Filing Distribution also does not take into consideration other assets that are expected to be converted into cash subsequent to the Filing.

MedCath's management and Board of Directors will continue to evaluate the adequacy of the Holdback and may make adjustments as necessary to the Holdback prior to the Pre-filing Distribution.  The final amount of the Pre-Filing Distribution is subject to the approval by the Board of Directors and is subject to numerous risk factors listed in the Proxy and the Company's Form 10-K filed with the SEC on December 14, 2011.  Future additional distributions during the three year wind-down period, if any, will be made after the Filing in accordance with the DGCL once provision has been made for all liabilities of the Company. 

The Company will close its stock transfer books on the date on which the Filing is made and on that date the Company's common stock will cease to be quoted on a registered securities exchange and will otherwise cease to be traded.  The Company intends to announce the date of the Filing on a Form 8-K filed with the Securities Exchange Commission at least 20 days prior to the date on which the Filing is made.