UPDATE 1-HealthSouth to sell 6 acute care hospitals for $120 million

* Says to use proceeds to pay off debt

* Says deal to close by third quarter (Follows alerts)

May 18 (Reuters) - HealthSouth Corp , a leading U.S. operator of rehabilitation hospitals, said it will sell six of its long-term acute care hospitals to LifeCare Holdings Inc for $120 million, and will use the proceeds to pay off debt.

HealthSouth, which now plans to focus on its core business, does not expect the deal to affect its full-year outlook.

For the year, the company had forecast earnings per share from continuing operations of $1.28-$1.33. [ID:nWNAB9362].

It plans to use the proceeds from the deal to invest in the retirement of 10.75 percent senior notes.

The company will sell the long-term acute care hospitals located at Las Vegas, Texas, Sarasota, Pittsburgh, Mechanicsburg and North Louisiana.

Long-term acute care hospitals provide intensive course of rehabilitation lasting from a few weeks to a month.

The hospitals contributed $121.7 million of net operating revenue in 2010.

The deal is expected to close in the third quarter.

Shares of the company were trading flat at $27.58 on Wednesday morning on the New York Stock Exchange. (Reporting by Kavyanjali Kaushik in Bangalore)