Cornerstone Healthcare Merges with Solara Healthcare

Cornerstone Healthcare Group, a portfolio company of Highland Capital Management, has merged with Solara Healthcare. Both companies are Dallas-based providers of long-term acute care hospital services. No financial terms were disclosed.

PRESS RELEASE

Highland Capital Management, L.P. (“Highland”), an investment management firm based in Dallas, Texas, announced today that one of its portfolio companies, Cornerstone Healthcare Group, has completed a merger with Solara Healthcare.  Both Cornerstone and Solara are privately-owned, Dallas-based providers of Long-Term Acute Care (LTAC) hospital services.  Financial terms of the merger were not disclosed.

“Cornerstone has been a model investment since we acquired control through a debt restructuring in October 2007, with EBITDA improving from a loss of $600,000 in 2007 to over $25 million in 2009.  We are very excited to be combining Cornerstone with Solara, creating an even stronger platform for future growth,” said Patrick H. Daugherty, Partner and Head of Private Equity at Highland.  “We look forward to applying the best practices we have implemented at Cornerstone to help the combined company further enhance its quality of care and patient satisfaction, build even stronger relationships with physicians and the community, expand services, leverage operational synergies and increase profitability in order to grow the business.”

Daugherty added: “Cornerstone has benefited from Highland’s strong healthcare and operations expertise.  We continue to leverage these skills to evaluate attractive opportunities for growth and investment in the long-term acute care space for our portfolio companies and investors, focusing on identifying operators that excel in delivering high-quality care.”

The newly-combined company consists of 18 owned and managed LTAC hospitals, operating in Texas, Louisiana, Arizona, West Virginia, Ohio and Oklahoma.  It will be led by Mike Brohm, President and CEO of Cornerstone and the Cornerstone executive management team.  Cornerstone and Solara will both continue to operate under their existing brand names.

Highland has been an active investor in the Healthcare sector since 1998.  Highland’s other large healthcare equity investments include CCS Medical, a home delivery medical supply company, and American HomePatient, a full-service respiratory company.

About Highland Capital Management

Highland Capital Management, L.P. is a SEC-registered investment adviser with approximately $22 billion of assets under management. It is one of the largest global alternative fixed income managers, specializing in bank loans, high yield credit, distressed debt, structured products, real assets, and long-short equities, with a global geographic reach.

Highland’s diversified client base includes public pension plans, foundations and endowments, corporations, financial institutions, fund of funds, governments, high net worth individuals, and mutual fund investors. To best meet the different goals of these investors, Highland offers a variety of product types, including credit funds, private equity-style funds, managed separate accounts, hedge funds, retail mutual funds, and collateralized loan obligations (CLOs).

Highland Capital is headquartered in Dallas, Texas and maintains offices in New York, London and Singapore.