August 30, 2010 / 3:58 PM / 9 years ago

UPDATE 1-Court denies Skilled Healthcare's motion for mistrial

* Court grants injunction requiring co to comply with rules

* Co filed notice of appeal on injunction

* Further proceedings scheduled to begin on Aug. 31.

* Shares down as much as 15 pct (Adds analyst comments; updates stock movement)

Aug 30 (Reuters) - Skilled Healthcare Group Inc’s SKH.N shares fell 15 percent after a California court denied the company’s motion for mistrial over a jury verdict that found the company liable to pay $677 million in damages to patients for not providing sufficient nursing care.

The court also granted an order for permanent injunction that would require the company to provide specified nurse staffing levels, comply with specified laws governing staffing levels and provide reports and information to a monitor, Skilled Healthcare said in a statement late Friday.

The Foothill Ranch, California-based company has filed a notice of appeal on the injunction.

While Friday’s news was a disappointment for the nursing home operator, which faces bankruptcy concerns if it has to go through an expensive appeals process, analysts said a settlement seems a likely outcome.

The company is in negotiations to settle with the plaintiffs before the judge confirms the jury award. Further court proceedings are scheduled to begin on Aug. 31.

“If the company is forced into bankruptcy, it could be a long time before (plaintiffs) see payment or even know the amount of that payment. By settling for a more reasonable amount now, the plaintiffs’ can move on with their lives,” Jefferies analyst Arthur Henderson said in his note.

As of June 30, the company had cash and cash equivalents of $157 million.

This is not the first time the company is facing liquidity issues.

In 2001, Skilled Healthcare had filed for Chapter 11 protection after the federal government changed reimbursement rates and procedures for medical services provided to individuals in 1999. It emerged from that proceeding in 2003.

Earlier this month, the company had filed for a mistrial or a new trial, alleging juror misconduct, with the Superior Court of the state of California, county of Humboldt, on grounds of juror misconduct. [ID:nSGE6750KI]

The company’s shares have lost 55 percent of their value since July 7 when the jury found Skilled Healthcare violated California’s health and safety code. [ID:nSGE6660EF]

The shares were down 10 percent to $2.48 in morning trade on the New York Stock Exchange. They reached a low of $2.36 earlier in the session. (Reporting by Esha Dey in Bangalore; Editing by Aradhana Aravindan)

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