July 15, 2010 / 10:47 AM / 9 years ago

UPDATE 2-Skilled Healthcare, plaintiffs agree to talk; shrs soar

* Co, plaintiffs stay legal proceedings, enter mediation

* Proceedings stayed up to Aug. 9

* Shares jump as much as 46 pct (Adds analyst comments, updates share movement)

By Santosh Nadgir

BANGALORE, July 15 (Reuters) - Skilled Healthcare Group Inc SKH.N, which was ordered to pay $671 million in damages to patients by a California jury earlier this month, said it had reached an agreement with plaintiffs to stay all proceedings and pursue settlement talks.

Shares of the nursing home operator shot up 46 percent to $3.28 in early trade Thursday, making the stock one of the top gainers on the New York Stock Exchange. They later pared some of the gains and were up 27 percent at $2.85.

“We believe today’s announcement largely removes the risk that Skilled Healthcare will be forced into bankruptcy and will allow the litigation to be resolved in a much more reasonable manner,” Jefferies & Co analyst Arthur Henderson said in a note to clients.

Henderson raised his price target on the stock by $2 to $3.50 but maintained his “hold” rating.

“While the risk for a sizable settlement remains, we expect that the amount and terms would be structured in a way that would allow the company to remain solvent,” he said.

The stipulation with the plaintiffs is subject to approval by the Humboldt County Superior Court of California and is scheduled to be submitted to the judge there on Thursday.

The company said the plaintiffs had agreed not to seek any relief to convert the jury verdict to a judgment during the mediation process which runs up to Aug. 9.

The plaintiffs cannot seek to attach or obtain an interest in any of the company’s properties during this period.

In return, Skilled Healthcare agreed not to transfer or otherwise impair its assets outside of bankruptcy and not to file a voluntary petition for relief in any U.S. bankruptcy court.

On July 7, the jury had found that Skilled Healthcare violated California’s health and safety code by not providing the minimum 3.2 hours of direct nursing care per day to patients at 22 facilities.

The jury, which was yet to hear the punitive damages phase of the trial, had awarded $613 million in statutory damages and $58 million in restitution. (Reporting by Santosh Nadgir in Bangalore; Editing by Roshni Menon, Unnikrishnan Nair)

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